Reference no: EM132611230
As a finance manager, you have been schedule to attend an investment committee meeting chaired by the Chief Investment Officer (CIO). Four outstanding issues under your purview need to be resolved. You have asked one of your analyst Miss Z to short report on the outstanding issues as listed below.
a) The market consensus is that Analog Electronic Corporation has an ROE 5 9%, has a beta of 1.25, and plans to maintain indefinitely its traditional plowback ratio of 2/3. This year's earnings were $3 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 14%, and T-bills currently offer a 6% return.
i) Determine the price at which Analog stock should sell.
ii) Appraise the P/E ratio.
iii) Evaluate the present value of growth opportunities.
iv) Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/3. Determine the intrinsic value of the stock.
b) Explain what is meant by bond sterilization/immunization strategies
c) Explain what is meant by the duration of a bond.
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Determine the price at which analog stock should sell
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