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Question 6) Intel Corporation is a leading manufacturer of semiconductor chips. The firm was incorporated in 1968 in Santa Clara, California, and represents one of the greatest success stories of the computer age. Although Intel continues to grow, the industry in which it operates has matured, so there is some question whether the firm should be evaluated as a high-growth company or stable-growth company from now on. For example, in December 2007, the firm's shares were trading for $20.88, and has a price-earnings ratio of 17.622. Compared to Google Inc.'s price-earnings ratio of 53.71 on the same date, it would appear that the decision has already been made by the market. Intel's expected earnings for 2007 were $1.13 per share, and its payout ratio was 48%. Furthermore, selected financial data for the sector, industry, and seven of the largest firms (including Intel) are found in Exhibit P8-9.1 on page 301. a) Is Intel's current stock price of $20.88 reasonable in light of its sector, industry, and comparison firms? Comparable Firms Market Return on Dividend Long-Term Price to Net Profit Price to Free Description Cap P/E Equity % Yield % Debt to Equity Book Value Margin Cash Flow Sector: industrial goods 16.606 14.94% 1.48% 0.87 50.471 5.40% 75.481 Industry: industrial 15.900 18.40% 1.41% 0.64 10.11 7.90% -134.9 equipment and components Emerson Electric Co. $34.61B 19.276 23.72% 2.40% 0.494 4.257 9.54% 65.156 Parker-Hannifin Corp. 9.81B 14.150 18.16% 1.20% 0.308 2.298 8.25% 34.392 Roper Industries Inc. 4.44B 24.685 14.27% 0.50% 0.60 3.122 11.89% 232.735 Pentair Inc. 3.23B 17.943 11.56% 1.70% 0.485 1.974 4.48% 147.667 Walter Industries Inc. 2.19B 23.537 15.70% 0.30% 4.036 2.731 7.38% -10.682 Exhibit P8-9.1 Industry Comparables for Intel Corporation Return on Dividend Long-Term Price to Net Profit Price to Free Description Market Cap P/E Equity % Yield % Debt to Equity Book Value Margin Cash Flow Sector: technology 5.344.818 27.716 14.77% 1.90% 0.691 5.588 10.39% 55.435 Industry: semiconductor 252 898 19.9 16.20% 1.30% 0.096 3.42 15.50% 193.3 -broad line Intel Corp. 120.51B 17.622 19.63% 1.90% 0.064 3.437 18.72% 121.039 Texas Instruments Inc. 44.62B 11.08 22.94% 0.50% 0.004 3.71 18.67% -5.577.55 STMicroelectronics NV 16.35B 24.959 7.81% 0,70% 0.209 1.764 8.24% -11.219 Advanced Micro 11.79B 21.152 12.61% 0.00% 0.138 2.088 10.13% -58.916 Devices Inc. Analog Devices Inc. 11.48B 22.667 15.42% 1.90% NA 3.342 21.48% 311.392 Maxim Integrated 10.28B 23.025 16.93% 1.90% NA 3.681 21.39% NA Products Inc. National Semiconductor 8.04B 18.49 25.67% 0.60% 0.012 4.481 22.18% 154.483 Corp