## [answered] 1. Deployment Specialists pays a current (annual) dividend

1. Deployment Specialists pays a current (annual) dividend of \$1 and is expected to grow at 24% for two

years and then at 6% thereafter. If the required return for Deployment Specialists is 10.0%, what is the

intrinsic value of Deployment Specialists stock? (Do not round intermediate calculations. Round your

Intrinsic value \$ Answer is NOT 43.14 2. A firm pays a current dividend of \$2, which is expected to grow at a rate of 9% indefinitely. If the

current value of the firm?s shares is \$109, what is the required return applicable to the investment based

on the constant-growth dividend discount model (DDM)? (Do not round intermediate calculations.)

DDM % 8.

Even Better Products has come out with a new and improved product. As a result, the firm projects an

ROE of 20%, and it will maintain a plowback ratio of 0.40. Its projected earnings are \$3 per share.

Investors expect a 16% rate of return on the stock.

a. At what price and P/E ratio would you expect the firm to sell? (Do not round intermediate

P/E ratio b. What is the present value of growth opportunities? (Do not round intermediate calculations.

PVGO \$ c. What would be the P/E ratio and the present value of growth opportunities if the firm planned to

reinvest only 30% of its earnings? (Do not round intermediate calculations. Round your answers

to 2 decimal places.) P/E ratio

PVGO \$ 10.

The market consensus is that Analog Electronic Corporation has an ROE = 9% and a beta of 1.65. It

plans to maintain indefinitely its traditional plowback ratio of 2/3. This year's earnings were \$2.8 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 Analog stock should sell. (Do not round intermediate calculations. Round

Price \$ b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answers to 2

decimal places.)

P/E ratio

Trailing c. Calculate the present value of growth opportunities. (Negative amount should be indicated by a

minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

PVGO \$ d. Suppose your research convinces you Analog will announce momentarily that it will immediately

reduce its plowback ratio to 1/3. Find the intrinsic value of the stock. (Do not round intermediate

Intrinsic value of the stock \$

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