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Problem $18-10($Algo$)$

The market consensus is that Analog Electronic Corporation has an ROE $=9\%$ and a beta of $1\mathrm{.}30$ and plans to maintain indefinitely its traditional plowback ratio of $\frac{1}{3}.$ This year's earnings were $$2\mathrm{.}90$ per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is $11\%,$ 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 $\frac{2}{3}.$ Find the intrinsic value of the stock.