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
SCORPION-xisa [38]
3 years ago
10

Castles in the Sand generates a rate of return of 12% on its investments and maintains a plowback ratio of .40. Its earnings thi

s year will be $3 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 of the plowback ratio is reduced to .30. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price $ P/E ratio
Business
1 answer:
tangare [24]3 years ago
7 0

Answer:

(a) $34.61; 11.54

(b) $32.81; 10.94

Explanation:

(a) Stock Price = D ÷ (Ke – G)

Where,

D is dividend next year,

Ke is required rate of return on equity

G is growth rate

Growth rate = ROE × plow-back ratio

                    = 0.12 × 0.40

                    = 0.048 or 4.8%

Dividend = Current EPS × (1 - plow back ratio)

               = $3 × 0.6

               = $1.8

Stock Price:

= $1.8 ÷ (0.10 - 0.048)

= $34.61

P/E Ratio = Stock Price ÷ EPS

               = $34.61 ÷ $3

               = 11.54

(b) New growth rate = 0.12 × 0.30

                                  = 0.036 or 3.6%

Dividend = Current EPS × (1 - plow back ratio)

               = $3 × 0.7

               = $2.1

Stock Price = $2.1 ÷ (0.10 - 0.036)

                   = $32.81

P/E Ratio = Stock Price ÷ EPS

               = $32.81 ÷ $3

               = 10.94

You might be interested in
True or false: society can attain a higher degree of specialization without the use of money than it can with money.
dalvyx [7]

Society can attain a higher degree of specialization without the use of money than it can with money. The given statement is false.

In order to become more effective, specialization in business is concentrating on a single product or a small range of items. Specialization can boost productivity and give a company or economy a competitive advantage.

A speedier, more efficient workflow is the outcome of each person being able to give their particular task the degree of focus they are capable of. Through specialization, a worker can leverage their education and work history to speed up procedures and boost sales.

One nation might, for instance, be a specialist in growing coffee beans, giving it a competitive edge. Additionally, it can enable this nation to use its current resources to create a sizable quantity of high-quality coffee beans.

Learn more about specialization here

brainly.com/question/24448534

#SPJ4

6 0
1 year ago
Suppose a consumer has an income of $16, the price of a is $2, and the price of b is $1. which combination is on the consumer's
Crazy boy [7]

The combination is on the consumer's budget line. is Option B. 5A and 6B.

The budget line is a graphical delineation of all possible mixtures of the 2 commodities that can be bought with provided profits and price in order that the charge of each of these combos is equal to the financial income of the patron.

In economics, a budget line constraint represents all of the mixtures of products and services that a customer may also buy given modern-day expenses within his or her given earnings. consumer idea makes use of the principles of a budget constraint and a desire map as equipment to observe the parameters of purchaser choices.

A consumer has an income  = of $16

A = $2

B = $1

The sum of the total will be less than $16

Hence. option B  5A and 6B.

Learn more about the budget line here:-brainly.com/question/14524034

#SPJ4

Disclaimer: your question is incomplete, please see below for the complete question.

A. 6A and 5B

B. 5A and 6B.

C. 5A and 5B

D. 4A and 6 B

5 0
1 year ago
ABC Corporation has declared a rights offering to stockholders of record on Thursday, October 22nd, payable on Friday, November
AysviL [449]

Answer:

November 6th is the last date to exercise the rights.

Explanation:

The shareholders have right to sell the rights to other shareholder, for which the shareholders need to exercise the rights before the right issue. If the shareholders doesn't makes any exercise of right issue before date then he is not entitled to rights anymore. The last date is the date on which the payment is made.

7 0
2 years ago
The U.S. National Treasury issued $3 million of 2.7% bonds, due in 10 years, with interest payable annually at year-end. Calcula
lesya [120]

Answer:

$81000

Explanation:

The calculation is simple. Bond interest is simply calculated by multiplying bond value with the assorted interest rate.

For example

A bond with $1000 value with 5% interest is simply 5% of $1000 = $50

Therefore,

$3,000,000 * 2.7% = $81000

(2.7 % = 0.027)

Hope that helps.

3 0
3 years ago
he following information relates to the manufacturing operations of the Abbra Publishing Company for the year: Beginning Ending
Serhud [2]

Answer:

Purchases= $1,091,000

Explanation:

Giving the following information:

Beginning Raw materials inventory = $549,000

Ending Raw materials inventory= $612,000

The raw materials used in production= $1,028,000.

<u>To calculate the raw material purchased, we need to use the following formula:</u>

Purchases= production + ending inventory - beginning inventory

Purchases= 1,028,000 + 612,000 - 549,000

Purchases= $1,091,000

4 0
3 years ago
Other questions:
  • Decisions by the coffee collective regarding which type of organic dog biscuit to offer is an example of which element of retail
    7·1 answer
  • If Chester Corp. were to buy all of it's shares outstanding at its current price, how much would it cost Chester Corp, excluding
    11·1 answer
  • Describe two factors that have led to the greater interconnectedness of countries.
    5·1 answer
  • The addition of acceptance criteria factors to the milestone schedule in a project charter helps the team understand who will ju
    5·1 answer
  • Baker Company owns 15% of the common stock of Charlie Corporation and used the fair-value method to account for this investment.
    15·1 answer
  • Jacqueline, a brilliant new ph.d. in economics, has turned down many job offers because she hopes eventually to teach at one of
    8·1 answer
  • Joe Downey is currently 65 years of age. He is currently drawing $20,000 a year out of his IRA. He expects to live to 100 and wa
    11·1 answer
  • A variable costing income statement ______. Multiple select question. calculates contribution margin, while the absorption costi
    11·1 answer
  • ________ is a technique used to predict future outcomes based on historical data and analytics techniques.
    6·1 answer
  • According to the path-goal theory, the participative style is recommended when group members are performing repetitive tasks.
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!