Question: Please answer the following (15 points question total) A corporation has a current P/E ratio of 2.8 and a current P/B ratio of 1.4. The

Please answer the following (15 points question total) A corporation has

Please answer the following

(15 points question total) A corporation has a current P/E ratio of 2.8 and a current P/B ratio of 1.4. The company has a cost of equity of 50%, a realized rate of return on equity, ROE, of 50%, and an equity reinvestment rate of 80%. The company announces that it will decrease its equity reinvestment rate to 50% effective immediately. (a) (5 points) Find the new P/ E ratio of the company following its reinvestment policy change. (b) (5 points) Find the new P/ B ratio of the company following its reinvestment policy change. (c) (5 points) Find the new PEG ratio of the company following its reinvestment policy change

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

PR 4-5A Complete accounting cycle OBJ. 4, 5 For the past several years, Jolene Upton has operated a part-time consulting business from her home. As of July 1, 2019, Jolene decided to move to rented...

Please answer the following: Comparative financial statements for Weller Corporation for the fiscal year ending December 31 appear below. The company did not issue any new common or preferred shares...

it is hurry, plz nothing missed, thanks Question 22 15 p (15 points question total) Elon Mining Inc. is currently reinvesting 50% of its net income back into the business and delivers a return on...

(15 points question total) Elon Mining Inc. is currently reinvesting 50% of its net income back into the business and delivers a return on equity (ROE) of 12% with a net profit margin of 8%. The...

Mr. Entrepreneur's Story, continued... Part 1 Because of his business acumen and an element of luck, ABC Corporation has been doing really well and has become one of the major players in baby...

(15 points question total) Devs Inc. is currently trading at a forward P/D (price-to-dividend) ratio of 25, a forward P/E ratio of 20, a P/B ratio of 4 and a P/S ratio of 3. Please answer the...

Chapter 17 Accounting Analysis i Saved The ratio of costs to revenues can indicate opportunities for activity-based costing to increase efficiency and reduce costs. Refer to Apple's and Google's 2017...

(15 points question total) BiteDance Inc. has a weighted-average cost of capital (WACC) equal to 15% and is subject to a 20% corporate income tax rate. The company has a return on capital (ROC) equal...

Please answer b & d. thank you QUESTION 1 (50 MARKS) Haziq Iskandar is the director of Robust Sdn Bhd. The company has traded for 30 years and has in the past achieved very good levels of growth and...

How could general managers communicate changes related to a strategic renewal process across borders?

In formally proving that lim_(x->-5)((1)/(9)x-6)=-(59)/(9), let epsi >0 be arbitrary. Determine delta as a function of epsi .

Find the derivative F ' ( x ) i f F ( x ) = ( e x 5 1 ) 7

On-Time Delivery Company acquired an adjacent lot to construct a new warehouse, paying $90,000 and giving a short-term note for $50,000. Legal fees paid were $1,750, delinquent taxes assumed were...

A partnership has the following account balances: Cash, $70,000; Other Assets, $540,000; Liabilities, $260,000; Nixon (50% of profits and losses), $170,000; Cleveland (30%), $110,000; Pierce (20%),...

The City of Saltwater Beach established an enterprise fund in 2015 to construct and operate Tribute Aquatic Center, a public swimming pool. The pool was completed and began operations in 2016. All...

Consider the birth-and-death process with the following mean rates. The birth rates are 0 = 2, 1 = 3, 2 = 2, 3 = 1, and n = 0 for n > 3. The death rates are 1 = 3, 2 = 4, 3 = 1, and n = 2 for n > 4....

What principal amount will have a maturity value of $5437.52 after 27 months, if it earns 8.5% compounded quarterly?

Tori and some other childeen experimented with balls to see which ones rolled. First using a piece of cardboard to use as a ramp, they angled it on a block to the floor to test the balls. Then Tori...

Kalman Shutters, Inc., manufactures custom window shutters on a job-order basis. Kalman has invested heavily in precision woodworking equipment. As a result, the company has a reputation for...

Recall that Louden, Inc., has a division in Canada that makes paint. Louden has another U.S. division, the Retail Division, that operates a chain of home improvement stores. The Retail Division would...

Louden, Inc., has a division in Canada that makes paint and another division in the United States that constructs subdivisions. The Paint Division incurs manufacturing costs of $4.60 for one gallon...