1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Alexus [3.1K]
3 years ago
10

Even Better Products has come out with an even better product. As a result, the firm projects an ROE of 20%, and it will maintai

n a plowback ratio of 0.03. Its earnings this year will be $2 per share. Investors expect a 12% rate of return on the stock.
Business
1 answer:
TEA [102]3 years ago
6 0

Answer:

Price $17

PE ratio 8.5 times

Explanation:

As per given data

ROE = 20%,

Plowback ratio = b= 0.03,

EPS = $2,

k= 12%

As plowback referr to the retentrion value, deducting its effect from EPS

Dividend= EPS × ( 1 − b ) = $2 × ( 1 −0.03 )= $1.94

Growth = ROE x b = 20% x 0.03 = 0.006 = 0.6%

Using Dividendvaluation method we will calculate the price.

Price  = Dividend  / (Rate of return - Growth rate )

Price  = $1.94  / ( 12% - 0.6% ) = $17

P / E Ratio = Price / EPS = $17 / $2 = 8.5

You might be interested in
Claire wants to include animations in her presentation slides. Which element of the presentation program’s interface will have t
Trava [24]

The option would be available in the Animation tab available on Claire’s Microsoft Point.

On the Animation tab, the Advanced Animation column would provide Claire with the necessary tools to add animations to the various content that she inserts in her slide.

Selections include adding animation to the content for emphasis, revealing contents one-by-one to avoid information overload as well as removing contents for relatively the same purpose.

7 0
2 years ago
Read 2 more answers
Wallace Container Company issued $100 par value preferred stock 10 years ago. The stock provided a 7 percent yield at the time o
pshichka [43]

Answer: kp = D/Po

               D = 0.07 X $100 = $7

               kp  = 7/63

               kp = 11.11%

Explanation: The dividend paid on the preferred stock is 7 percent of the par value and the current market price is $63. Thus, the cost of preferred stock can be obtained by dividing the dividend paid by the current market price of the preferred stocks.

3 0
3 years ago
Your bank account pays an interest rate of 8 percent. You are considering buying a share of stock in XYZ Corporation for $110. A
erica [24]

Your bank account pays an interest rate of 8 percent. You are considering buying a share of stock in XYZ Corporation for $110. After 1, 2, and 3 years, it will pay a dividend of $5. You expect to sell the stock after 3 years for $120. Is XYZ a good investment-This statement is False

Explanation:

Your bank account pays an interest rate of 8 percent. You are considering buying a share of stock in XYZ Corporation for $110. After 1, 2, and 3 years, it will pay a dividend of $5. You expect to sell the stock after 3 years for $120. Is XYZ a good investment

The above statement is false, since it is a bad investment because after figuring out the stock's value you get $108.15, which is less than what you initially paid for it.

4 0
3 years ago
Which of the following factors will make the demand for a product relatively elastic? rev: 05_14_2018 Multiple Choice Purchases
Hoochie [10]

Answer:

The good is considered a necessity.

Explanation:

Price elasticity of demand is a measure of the sensitivity of demand for a good or service to changes in the price of that product. We say that the price elasticity of demand is elastic when a percentage change in the price of this good has major impacts on demand. On the contrary, we say that the price elasticity of demand is inelastic when variations in the price of goods have little or no influence on demand.

Usually elastic goods are those that can be replaced, so that rising prices cause a drastic drop in demand that will flow to another product. For example, if the price of the burger rises, consumers may stop buying burgers and substitute pizza (assuming these products are substitutes). On the contrary, if the good is needed, it usually tends to be inelastic, that is, the price increase does not considerably decrease the demand, because consumers need this good. For example, medicines.

3 0
3 years ago
State the purpose of footing the total column in the​ client's accounts receivable trial​ balance, tracing individual customer n
Pani-rosa [81]
No se y ni me importa
7 0
3 years ago
Other questions:
  • Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However
    10·1 answer
  • Tyrell has a bankruptcy on his credit report and therefore pays higher interest rates on his current loans. He calculates that t
    5·1 answer
  • Patrick Company expects to generate freeminuscash of​ $120,000 per year forever. If the​ firm's required return is 12​ percent,
    9·1 answer
  • A farmer believes that his new irrigation method would result in more crop yield than the old one. To test his theory, he applie
    8·2 answers
  • What are the three reasons that companies import?
    8·1 answer
  • Jackson and Campbell have capital balances of $100,000 and $300,000, respectively. Jackson devotes full time and Campbell devote
    5·1 answer
  • You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% a
    9·1 answer
  • All of the following statements are true regarding the periodic inventory system except Under the periodic system, a company use
    8·1 answer
  • If a management team wishes to undertake efforts specifically aimed at helping the company meet or beat the investor-expected in
    6·1 answer
  • What concept is developed from an orderly, predictable environment versus a disorderly, irregular environment and is characteris
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!