Question: Please show your work ). The market consensus is that Analog Electronic Corpo- ration has an ROE = 9%, a beta of 1.25, and plans

Please show your work ). The market consensus is that Analog

Please show your work

). The market consensus is that Analog Electronic Corpo- ration has an ROE = 9%, a beta of 1.25, and plans to maintain indefinitely its traditional plowback ratio of 2/3. This year's earnings were $3 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 14%, and T-bills cur- rently offer a 6% return. a. Find the price at which Analog stock should sell. b. Calculate the P/E ratio. c. Calculate the present value of growth opportunities. d. Suppose your research convinces you Analog will announce momentarily that it will immediately re- duce its plowback ratio to 1/3. Find the intrinsic value of the stock. e. The market is still unaware of this decision. Explain why V, no longer equals Po and why Vo is greater or less than Po

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