The market consensus is that analog electronic corporation has an roe = 9%, has a beta of 1.30, and plans to maintain indefinitely its traditional plowback ratio of 1/3. this year's earnings were $2.90 per share. the annual dividend was just paid. the consensus estimate of the coming year's market return is 11%, and t-bills currently offer a 5% return.
find the price at which analog stock should sell.

Please see below.

Explanation:

a.

K = rf+beta(rm - rf) = 5 + 1.3*(11-5) = 12.8%

g = ROE*b = 9*1/3 = 3%

D1 = E0*(1+g)*(1-b) = 2.9*(1.03)*2/3 = 1.99

P0 = D1/(k-g) = 1.99/(0.128-0.03) = 20.32

b.

P/E ratio = price per share/EPS

Earnings at time period 1 (E1) = EPS*(1+g) = 2.9*(1+0.03) = 2.987

Leading = P0/E1 = 20.32/2.987 = 6.8

Trailing = P0/E0 = 20.32/2.9 = 7.0068

C.

PVGO = P0 - (E1/K) = 20.32 - (2.987/0.128) = -3.016

The low P/E ratios and negative PVGO are due to a poor ROE = 9%, which is less than the required rate = 12.8%

you can lose ranking 2 ways.

1) you don't have enough points due to you expending them by asking questions/your answers are deleted.

2) your brainliest's expired. this means that brainliests, once they exceed the 30 day limit, expires. this is to ensure that you continue to contribute into the community at a constant rank if you want to continue to have/exceed the rank you have right now.

if you go to profile, and click "show more information" located on the bottom left of the box with your information (on top of the questions answered, questions asked, and friends), you will be given the following information (example):

member since : 02/13/2017, 18: 11

questions answered: 9741

questions asked: 162

no. of brainliest answers: 1575

brainliest answers in last 30 days: 10

warnings: 0 view

questions/answers reported: 2637

questions/answers incorrectly reported: 64

look at the "brainliest answers in the last 30 days". this is the one that will affect your rank other than your points. again, once your brainliest expires (was earned 31+ days ago), it will not be counted.

~

the answer is a. $209,000