The basis of the earnings multiplier model

Assignment Help Financial Management
Reference no: EM131576924

You have been reading about the Madison Computer Company (MCC) which currently retains 90 percent of its earnings ($5 a share this year). It earns an ROE of almost 30 percent.

a. Assuming a required rate of return of 14 percent, how much would you pay for MCC on the basis of the earnings multiplier model? Discuss your answer.

b. What would you pay for Madison Computer if its retention rate was 60 percent and its ROE was 19 percent? Show your work.

Reference no: EM131576924

Questions Cloud

Describe the diagnosis and staging of cancer : Describe the diagnosis and staging of cancer. Describe at least three complications of cancer
Explain who is liable for daves intentional tort : Provide your answers in a case analysis of a minimum of 500 words. Cite any direct quotes or paraphrased material from outside sources. Use APA format.
How many golf carts must golf glider sell : Egolf glider makes gasoline-powered golf carts. How many golf carts must golf glider sell to earn 600,000 after tax
Courier delivery problem : In your program design, make use of the Strategy pattern to supply heuristic to the search procedure - Create all your Java source files in the default package
The basis of the earnings multiplier model : Assuming a required rate of return of 14 percent, how much would you pay for MCC on the basis of the earnings multiplier model?
What is the future value of your windfall in three years : What is the present value of your? windfall? What is the future value of your windfall in three years? (on the date of the last? payment)?
What is the effect of this transaction on this year : What is the effect of this transaction on this year and next year's income statement and income tax expense? Why
Selling costs and margin management : Differentiate between Multiple Products, Selling Costs and Margin Management
Compare the number of comparisons needed to sort lists : Compare the number of comparisons needed to sort lists of n elements for n = 100, 1000, and 10,000 from the set of positive integers less than 1,000,000.

Reviews

Write a Review

Financial Management Questions & Answers

  Capital budgeting information-present itemised breakdown

Capital Budgeting Information -Present an itemised breakdown (and the total) for each of the following:  listed on the Australian Securities Exchange following an Initial Public Offering (IPO) in 2015. Costa is a supplier of fresh fruit and vegetable..

  Calculate the firms tax on its operating earnings only

Interest versus dividend income During the year just ended, Shering Distributors, Inc., had pretax earnings from operations of $490,000. Calculate the firm’s tax on its operating earnings only. Find the tax and the after-tax amount attributable to th..

  Dividend is expected to grow forever at constant rate

Woidtke Manufacturing's stock currently sells for $34 a share. The stock just paid a dividend of $3.00 a share (i.e., D0 = $3.00), and the dividend is expected to grow forever at a constant rate of 9% a year. What stock price is expected 1 year from ..

  Market values of these comparable firms

The analyst should be careful not to mechanically add an acquisition premium to the target firm’s estimated value based on the comparable companies’ method if there is evidence that the market values of these “comparable firms” already reflect the ef..

  What is the maximum dividend per share that firm can pay

What is the maximum dividend per share that the firm can pay? Indicate the effects of an $80,000 cash dividend on stockholders' equity.

  What''s the largest stock exchange in the world

What's the largest stock exchange in the world, in terms of market capitalization (basically, the total value of all listed companies)?

  What is the npv of the project in best-case scenario

We are evaluating a project that costs $111246, has a seven-year life, and has no salvage value. What is the NPV of the project in best-case scenario?

  Have to deposit into the account every quarter

If you need $5,000 at the end of 10 years (i.e. 4 years after the last payment is made into the account), how much would you have to deposit into the account.

  Money received all at once during the second year

Will it be better to have the money received all at once during the second year? Interest is 10%

  Graph the nominal interest rate and the real interest rate

Based on your calculations of the real interest rate, what would have been the best year to have invested in 10-year U.S. Treasury bonds?

  Treasury bonds-extolling the benefits of investing in bonds

At the dinner table, your father is extolling the benefits of investing in bonds. He insists that as a conservative investor he will make only investments that are safe, and what could be safer that a bond, especially a U.S Treasury long-term bond? 1..

  Value of the common stock-investors require a rate of return

Gilliland Motot, Inc., paid a $4.46 dividend last year. If Gilliland's return on equity is 31%, and its retention rate is 31%, what is the value of the common stock if the investors require a rate of return of 18%?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd