The market consensus is that Analog Electronic Corporation has an ROE = 8% and a beta of 1.75. It plans to maintain indefinitely its traditional plowback ratio of 1/4. This year's earnings were $3.4 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 places.)
Price $ 16.01
b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
P/E ratio of:
1. Leading 4.62
2. Trailing
c. Calculate the present value of growth opportunities. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
PVGO $
d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 3/4. Find the intrinsic value of the stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Intrinsic value of the stock $