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Castles in the Sand generates a rate of return of 12% on its investments and maintains a plowback ratio of .50. Its earnings this year will be $5 per share. Investors expect a 10% rate of return on the stock.
a. Find the price and P/E ratio of the firm. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price $ P/E ratio
b. Find the price and P/E ratio of the firm, if the plowback ratio is reduced to .40? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price $ P/E ratio.
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the donley brothers company had encountered the problem of latent defects in some of its purchased castings. being
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