The market consensus is that Electronic Corporation has an ROE = 9%, has a beta of 1.25, and plans to maintain indefinitely its traditional plowback…
BBA Investment Analysis · 2023 · Solved Question with Answer
The market consensus is that Electronic Corporation has an ROE = 9%, has a beta of 1.25, and plans to maintain indefinitely its traditional plowback ratio of 2/3. This year's earnings were Rs 3 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 14%, and T-bills currently offer a 6% return.
a. Find the price at which Electric stock should sell.
b. Calculate the P/E ratio.
c. Calculate the present value of growth opportunities.