Compute the projected price for next year

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Question - Mtouche Technology Berhad (MTB) currently sells at RM32 per share and its latest 12 months earnings are RM4 per share with a dividend payout of 50 percent. You are keen to buy MTOUCHE (0092) with 2 lots.

Show all your working steps.

i. Calculate MTB's current price-to-earnings ratio.

ii. If you expect earnings to grow by 10 percent a year, compute the projected price for next year if the price-to-earnings ratio remains unchanged.

iii. You analyse the data and estimate that the firm's payout ratio will remain the same. Assume that the expected growth rate of dividends is 10 percent and you have a required rate of return of 16 percent, would this stock be a good buy? Explain your answer.

iv. If interest rates are expected to decline, describe the likely effect on MTB's price to-earnings ratio.

Reference no: EM133074606

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