Analysts reassess manufactured earnings

Assignment Help Accounting Basics
Reference no: EM13530540

3a. Manufactured Earnings is a "darling" of Wall Street analysts. Its current market price is $15 per share, and its book value is $5 per share. Analysts forecast that the firm's book value will grow by 10 percent per year indefinitely, and the cost of equity is 15 percent. Given these facts, what is the market's expectation of the firm's long-term average ROE?
b. Given the information in part a, what will be Manufactured Earnings' stock price if the market revises its expectations of long-term average ROE to 20 percent?
c. Analysts reassess Manufactured Earnings' future performance as follows: growth in book value increases to 12 percent per year, but the ROE of the incremental book value is only 15 percent. What is the impact on the market-to-book ratio?

Reference no: EM13530540

Questions Cloud

How are the laws of supply and demand : Construct a graph showing supply and demand in the electronic dog feeder market and how are the laws of supply and demand illustrated in this graph?
Calculate return on net operating assets : Calculate return on net operating assets for all three years. Identify reasons for any changes.
Evaluate the ph of vinegar from the molarity of vinegar : Vinegar is 5% acetic acid and its molarity is 0.833M. Is the concentration of the hydronium ion in vinegar greater than, less than, or equal to 0.833 M--why or why not. Explain why it is incorrect to directly calculate the pH of vinegar from the m..
Important effect to activate proenzymes : Which of the following exerts the most important effect to activate proenzymes?
Analysts reassess manufactured earnings : Analysts reassess Manufactured Earnings' future performance as follows: growth in book value increases to 12 percent per year, but the ROE of the incremental book value is only 15 percent. What is the impact on the market-to-book ratio?
Obtain the average frictional force that stops the bullet : 7.80-g bullet moving at 490 m/s penetrates a tree trunk to a depth of 6.3 cm. Use work and energy considerations to find the average frictional force that stops the bullet
Evaluate the energy required to excite a hydrogen atom : Calculate the energy, in joules, required to excite a hydrogen atom by causing an electric transition from the n=1 to the n=4 principal enegry level
Write a claim of value argument : Drawing evidence from the readings and experience Write a claim of value argument about an aspect of family heritage and individual identity.
Calculate the work done by the friction force : Starting from rest, a 5.5-kg block slides 3.00 m down a rough 30.0° incline, Determine the work done by the friction force between block and incline

Reviews

Write a Review

Accounting Basics Questions & Answers

  Opening the mail and recording payments

Which of the following should be performed by the persons opening the mail and recording payments?

  Caine bottling corporation is considering the purchase of

caine bottling corporation is considering the purchase of a new bottling machine. the machine would cost 200000 and has

  Veronica tanner the president of tanner enterprises is

veronica tanner the president of tanner enterprises is considering two investment opportuni- ties. because of limited

  Should land be recorded in johnson repair services record

On April 1, Johnson Repair Service was offered $60,000 for the land by a national retail chain. At what value should the land be recorded in Johnson Repair Service's records?

  Generating forecasts of the outlays

What factors are likely to drive a firm's outlays for new capital (such as plant, property, and equipment) and for working capital (such as receivables and inventory)? What ratios would you use to help generate forecasts of these outlays?

  Non-exclusive license of foreign patents

BlueCo is a US corporation with multiple business activities. On January 1, 2009, BlueCo granted a non-exclusive license of foreign patents to Rosso Ltd., an unrelated foreign corporation

  Refinancing payment

Blocker, Inc. had $10,000 of notes coming due on January 10, 2011- how much of the $10,000 note should be shown as current?

  Journal entry to record the lease

Company has assets of $1,800,000, liabilities of $1,100,000 and stockholder's equity of $700,000. (a) prepare the journal entry to record the lease, and (b) compute the and comment on the debt to total assets ratio at the year-end.

  Problem related to convertible bonds

Coyle Corp. issued $10,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company's investment banker estimates they would have been sold at 95. Expenses of issuing the bonds were $70,000.

  Journalize the transactions that occurred in september 2015

Journalize the transactions that occurred in September 2015 for Aquamarines. No explanations are needed. Identify each accounts payable andaccounts receivable with the vendor or customer name

  Gains-losses on the purchase and resale of treasury stock

Gains and losses on the purchase and resale of treasury stock may be reflected only in:

  The seller cash and a note due in two years

Harry purchased equipment for his business and gave the seller cash and a note due in two years.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd