Computing the present value of growth opportunities

Reference no: EM131994833

Question: The market consensus is that Analog Electronic Corporation has an ROE = 11%, has a beta of 1.50, and plans to maintain indefinitely its traditional plowback ratio of 1/5. This year's earnings were $2.50 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 15%, and T-bills currently offer a 5% 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.)

P/E Ratio

Leading

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. Omit the "tiny_mce_markerquot; sign in your response.)

PVGO $

Reference no: EM131994833

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