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


Please help answer all 4 questions in attachment. (Q's 1, 2, 8, 10)


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

 

answer to 2 decimal places.)

 

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

 

calculations. Round your answers to 2 decimal places.) $ Price

 

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

 

Round your answer to 2 decimal places.)

 

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

 

your answer to 2 decimal places.)

 

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

 

decimal places.)

 

P/E ratio

 

Leading

 

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

 

calculations. Round your answer to 2 decimal places.)

 

Intrinsic value of the stock $

 


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