Estimate the price-book value ratio for company y

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Company Y is expected to have high earning growth for the next ?ve years and 6% after that. The dividend payout ratio will be only 10% during the high growth phase, but will increase to 60% in steady state. The return on equity was 21% in the most recent time period and is expected to stay at that level for the next 5 years. The stock has a beta of 1.65 currently, but the beta is expected to drop to 1.10 in steady state. The treasury bond rate is 7.25%, and the expected market return is 13%. Estimate the price/book value ratio for company Y.

Reference no: EM132623252

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