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loris [4]
3 years ago
13

The required rate of return on the stock of Knight Titles is 8%. Its expected ROE is 10% and its expected earnings per share thi

s year is $6.00. If the firm's plowback rate (b) is 40%, its P/E ratio will be _______.a.None of the aboveb.8.33c.15d.14.29
Business
1 answer:
tensa zangetsu [6.8K]3 years ago
4 0

Answer:                   Ke = 8% = 0.08  

                              ROE = 10% = 0.10

             Expected EPS = $6

      Plowback rate ( b)  = 40% = 0.40

 Dividend per share (D) =  60%x $6 = $3.60

                                   Po =  D(1+g )/ke-g              

                                   Po = $3.6(1+0.04)/0.08-0.04

                                   Po = $3.744/0.04

                                   Po = $93.60

The current market price is $93.60

The price-earnings ratio = market price per share/Earnings per share

                                          = $93.6/$6

                                           = 15.6

The correct answer is C

Explanation: The price-earnings ratio is the ratio of market  price per share to earnings per share. In this scenario, it is important to obtain the market price per share using the above formula. Thereafter, the market price per share is divided by the earnings per share. There is need to calculate the dividend per share based on the retention rate of 40%. since the retention rate is 40%, the dividend pay-out rate will be 60%. Thus, dividend is 60% of the expected earnings per share. The estimation of growth rate (g) is based on Gordon's growth model, which is g = r x b. r represents return on equity while b denotes the plowback(retention rate).                

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Answer:

Value-Added.

Explanation:

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5 0
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________ involves creating a video, e-mail, mobile message, advertisement, or other marketing event that is so infectious that c
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6 0
2 years ago
Which of the following is true? AChecks and Debit Cards both withdraw money directly from a bank account. BDebit Cards often hav
Nitella [24]
A will be your answer
3 0
3 years ago
Claudine Corporation will deposit $5,700 into a money market sinking fund at the end of each year for the next five years. How m
valkas [14]

Answer:

Accumulated amount at the end of the fifth year = $34,112.85

Explanation:

Sinking Fund involves saving an series of equal amount periodically invested at certain rate of interest to accumulate a target amount in the future. The target amount might be for the purpose of financing a specific capital project or loan repayment.

Where an equal deposit is invested the sum accumulated (deposit plus interest earned) at the end of the final period is known as the Future Value (FV) of the sinking fund.

The FV is determined as follows:

FV = A × ((1+r)^(n) -  1)/n)

where FV- future value, A- annual cash flow, r-rate of return, n- number of years.

<em>In this question, we have the details as follows</em>;

FV-?, A-5,700, r- 9%, n- 5

<em>So we can determine the FV;</em>

FV = 5,700 × ((1+0.09)^(5)- 1)/0.09

FV = 5,700 × 5.9847

FV = 34,112.85

Accumulated amount at the end of the fifth year = $34,112.85

8 0
3 years ago
Greyon spinning Mills Inc. owns 600 spinning machines out of these, only 500 are used in a given year. Given this information, t
andre [41]

Answer:

B.0.83

Explanation:

Data provided in the question

Total machines Available = 600

Number of machines used in a given year = 500

So by considering the above information, the utilization of spinning machines is

Utilization = Resource used ÷Resource available

                 = 500 ÷ 600

                 = 0.83

By dividing the resources used with the resources available we can get the utilization and the same is applied

6 0
3 years ago
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