Solution-Castles in the sand generates a rate of return

Castles in the sand generates a rate of return

Assignment Help Managerial Accounting

Reference no: EM13940317

Castles in the Sand generates a rate of return of 20% on its investments and maintains a plow back ratio of .30. Its earnings this year will be $4 per share. Investors expect a 12% rate of return on the stock.

a. Find the price and P/E ratio of the firm.

b. What happens to the P/E ratio if the plow back ratio is reduced to .20?

c. Show that if plow back equals zero, the earnings-price ratio, E/P, falls to the expected rate of return on the stock.

Rate of return.......... 20.00%
Plow back ratio... ..... 0.30
Earnings this year ......$4.00
Expected rate of return....12.00%
Plow back ratio (b) ...... 0.20
Plow back ratio (c) ......0.00

Reference no: EM13940317

Questions Cloud

Maintains a constant growth rate in dividends : Secolo Corporation stock currently sells for $81 per share. The market requires a return of 11.1 percent on the firm’s stock. If the company maintains a constant 3 percent growth rate in dividends, what was the most recent dividend per share paid on ..

Structure a risk management plan : You are required to select an event as a case study to structure a risk management plan of approximately 3,500 words. The selected event should provide enough complexity to allow the the possibility to develop an appropriate risk management plan.

The structure of probation effectively reintegrates : 1.Take a position on whether or not the structure of probation effectively reintegrates the offender back into society while avoiding the stigma of incarceration. Provide a rationale for your response.

What are the firm major strengths and weaknesses : Use the extended DuPont equation to provide a summary and overview of company's financial condition projected for 2014. What are the firm's major strengths and weaknesses

Castles in the sand generates a rate of return : What happens to the P/E ratio if the plow back ratio is reduced to .20? Show that if plow back equals zero, the earnings-price ratio, E/P, falls to the expected rate of return on the stock.

Description of the organizations key knowledge areas : Description of the organization's key knowledge areas - description of the organization's use of IT-based tools for managing knowledge

Design the logic and write the rest of the program : Design the logic and write the rest of the program using a nested statement. They are using JOptionPane.showInputDialog.

Dividends are expected to grow at a rate : Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 20 percent for the next three years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 10 percent, and the company just paid a di..

Cognitive moral development and locus of control : Evaluate yourself in terms of cognitive moral development and locus of control, eithical decision-making style, Moral disengagement, and Machiavellianism what does this tell you about your own ethical decision making?

User Account

All Pages

Castles in the sand generates a rate of return

Reference no: EM13940317

Reference no: EM13940317

Questions Cloud

Reviews

Write a Review

Managerial Accounting Questions & Answers

Manage budgets and financial plans

Prepare a retained earnings statement

Prepare a master budget for the three-month period

Construct the companys direct labor budget

Evaluate the predetermined overhead rate

Determine the company''s bid

Compute the pool rates for the different activities

Prepare Company financial statements

Prepare an analysis of terracycles

Discuss the ethical issues

Political resources in emerging markets

Management accounting - ehsan electronics company

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT