The market consensus is that Analog Electronic Corporation has an ROE = 12%, has a beta of 2.10, and plans to maintain indefinitely its traditional plowback ratio of 1/3. This year's earnings were $3.60 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 5% return.
a. Find the price at which Analog stock should sell.
b. Calculate the P/E ratio
c. Calculate the present value of growth opportunities.