Compute the present value of growth opportunities

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Question: The market consensus is that Analog Electronic Corporation has an ROE = 24%, has a beta of 2.25, and plans to maintain indefinitely its traditional plowback ratio of 2/5. This year's earnings were $3.90 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 16%, 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. Omit the "tiny_mce_markerquot; sign in your response.)

Price $

b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Leading

Trailing

c. Calculate the present value of growth opportunities.

Reference no: EM131993587

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