Nch corporation, which markets cleaning chemicals, insecticides and other products, paid dividends of $2.00 per share in 1993 on earnings of $4.00 per share. the book value of equity per share was $40.00, and earnings are expected to grow 6% a year in the long term. the stock has a beta of 0.85, and sells for $60 per share. (the treasury bond rate is 7% how much would the return on equity have to increase to justify the price/book value ratio at which nch sells for currently?

The reutrn on equity should be of 9.53%

Explanation:

We can solve the return on equity by considering the gordon model of dividend growth:

current dividends 2 dollars

next year dividends: current x (1 + g) = 2 x (1 + 0.06) = 2.12

Ke = 0.09533 = 9.53%

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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