Problem $18-10($Algo$)$

The market consensus is that Analog Electronic Corporation has an ROE $=15\%$ and a beta of $1\mathrm{.}60$ and plans to maintain indefinitely its

traditional plowback ratio of $\frac{3}{5}.$ This year's earnings were $$2\mathrm{.}30$ 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 $5\%$ return.

Required:

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 reduce its plowback ratio to $\frac{2}{5}.$

Find the intrinsic value of the stock.

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Required A

Required B

Find the price at which Analog stock should sell.

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

I have correctly answered A$,$ B$,$ and C$,$ but cannot figure out D$.$

A $=$ $$9\mathrm{.}64$

B $=$ Leading $3\mathrm{.}85$ Trailing $4\mathrm{.}19$

C $=$ $$-3\mathrm{.}28$