What is the current price and the current price-earnings ratio?

(b)What is the current plow-back ratio?

(c)What is the growth rate of earnings for the next 5 years according to the analysts? Hint: look for annual growth rates under "Analysis".

(d)What is the CAPM beta of CVS? Hint: look for "Statistics." If the risk-free rate Rfis 1% and the market risk premium E[RM] ? Rfis 6%, what is the required rate of return on CVS according to the CAPM?

(e)Suppose the earnings and dividends of CVS will grow at a rate equal to the forecast from part (c) forever meaning the Gordon Growth Model (GGM) applies. What is the price-earnings ratio according to the GGM?

(f)What growth rate does the current market price-earnings ratio imply, under our numerical assumptions regarding the value of the risk-free rate and the market risk premium.

Here is the data on CVS needed:

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Previous Close 76.18 Market Cap 100.67B Open 75.93 Beta (5Y Monthly) 0.82 Bid 0.00 x 1200 PE Ratio (TTM) 13.92 Ask 0.00 x 1300 EPS (TTM) 5.46 Day's Range 75.27 -76.41 Earnings Date May 04, 2021 52 Week Range 55.36 -77.44 Forward Dividend & Yield 2.00 (2.63%) Volume 4,197,578 Ex-Dividend Date Apr 22, 2021 Avg. Volume 6,733,690 1y Target Est 87.18 Previous Close 76.18 Market Cap 100.67B Open 75.93 Beta (5Y Monthly) 0.82 Bid 0.00 x 1200 PE Ratio (TTM) 13.92 Ask 0.00 x 1300 EPS (TTM) 5.46 Day's Range 75.27 -76.41 Earnings Date May 04, 2021 52 Week Range 55.36 -77.44 Forward Dividend & Yield 2.00 (2.63%) Volume 4,197,578 Ex-Dividend Date Apr 22, 2021 Avg. Volume 6,733,690 1y Target Est 87.18

Answer rating: 100% (QA)

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