Question

MF Corp. has an ROE of 18% and a plowback ratio of 50%. The market capitalization rate is 12%.

**a.** If the coming year’s earnings are expected
to be $2.60 per share, at what price will the stock sell?
**(Do not round intermediate calculations. Round your answer
to 2 decimal places.)**

**b.** What price do you expect MF shares to sell
for in two years? **(Do not round intermediate calculations.
Round your answer to 2 decimal places.)**

Answer #1

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The market consensus is that Analog Electronic Corporation has
an ROE = 12%, a beta of 1.75, and plans to maintain indefinitely
its traditional plowback ratio of 1/4. This year’s earnings were
$2.00 per share. The annual dividend was just paid. The consensus
estimate of the coming year’s market return is 13%, and T-bills
currently offer a 6% return.
a. Find the price at which Analog stock should
sell. (Do not round intermediate calculations. Round your
answer to 2 decimal...

the firm projects an ROE of 28%, and it will maintain a plowback
ratio of 0.20. Its earnings this year will be $5.0 per share.
Investors expect a 16% rate of return on the stock. What price do
you expect ART shares to sell for in 4 years?

1) Beta Corp. has a market capitalization rate of 12%, an ROE of
10% and a plowback ratio of 80%. Suppose Beta. Corp decides to pay
out 100% of its earnings. What will happen to its P/E ratio?
2) Alpha Corp. has a market capitalization rate of 12%, an ROE
of 16% and a plowback ratio of 50%. Suppose Alpha Corp. decides to
pay out 100% of its earnings. What will happen to its P/E
ratio?

Sisters Corp. expects to earn $6 per share next year. The firm’s
ROE is 16% and its plowback ratio is 60%. If the firm’s market
capitalization rate is 10%.
a. Calculate the price with the constant dividend
growth model. (Do not round intermediate
calculations.)
b. Calculate the price with no growth.
c. What is the present value of its growth
opportunities? (Do not round intermediate
calculations.)

The market consensus is that Analog Electronic Corporation has
an ROE of 9% and a beta of 1.25. It plans to maintain indefinitely
its traditional plowback ratio of 2/3. This year's earnings were $3
per share. The annual dividend was just paid. The consensus
estimate of the coming year's market return is 14%, and T-bills
currently offer a 6% return.
Calculate the P/E ratio. (LEADING AND TRAILING)
(Do not round intermediate calculations. Round your answers
to 2 decimal places.)
P/E...

Sisters Corp expects to earn $8 per share next year. The firm’s
ROE is 10% and its plowback ratio is 60%. If the firm’s market
capitalization rate is 8%.
a. Calculate the price with the constant
dividend growth model. (Do not round intermediate
calculations.)
Price
$
100
b. Calculate the price with no growth.
Price
$
c. What is the present value of its growth
opportunities? (Do not round intermediate
calculations.)
PVGO
$

Lee Sports projects an ROE of 20%, and it will maintain a
plowback ratio of 0.3. its earnings this year will be $2/share.
Investors expect a 12% rate of return on the stock.
a) What is the price and P/E ratio?
b) What is the PVGO?

Problem 3-6 Calculating Market Value Ratios [LO2]
Makers Corp. had additions to retained earnings for the year
just ended of $174,000. The firm paid out $190,000 in cash
dividends, and it has ending total equity of $4.95 million. The
company currently has 140,000 shares of common stock
outstanding.
What are earnings per share? (Do not round intermediate
calculations and round your final answer to 2 decimal places, e.g.,
32.16.)
Earnings
$ per share
What are dividends per share?...

The FI Corporation's dividends per share are expected to grow
indefinitely by 5% per year.
a. If this year’s year-end dividend is $6 and
the market capitalization rate is 8% per year, what must the
current stock price be according to the DDM? (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
Current stock price
$
b. If the expected earnings per share are $12,
what is the implied value of the ROE on future investment
opportunities?...

Makers Corp. had additions to retained earnings for the year
just ended of $301,000. The firm paid out $179,000 in cash
dividends, and it has ending total equity of $4.84 million. The
company currently has 150,000 shares of common stock
outstanding.
What are earnings per share? (Do not round intermediate
calculations and round your final answer to 2 decimal places, e.g.,
32.16.)
Earnings
$ per share
What are dividends per share?
(Do not round intermediate calculations
and round...

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