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Any finance majors/finance experts out there?

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  1. Hallettcopta Hallettcopta is offline

    Raleigh, NC
    United States

    Posts: 3,343
    Joined: Jun 08

    Mar 18th, 2009 (3/18/2009 7:09pm)

    I have been staring at this homework problem for about 20 mins now and have no clue where to start or how to solve it. Any help or input is greatly appreciated. My textbook and notes are of no help to me as they are worthless.

    Castles in the Sand generates a rate of return of 19% on its investments and maintains a plowback ratio of 0.25. Its earnings this year will be $3.9 per share. Investors expect a 14% rate of return on the stock.
    1. <LI>Find the price and P/E ratio of the firm. <LI>What is the stock price and the P/E ratio if the plowback ratio is reduced to 0.2? <LI>If plowback equals zero, what is the stock price and the earnings-price ratio. </LI>
    a. stock price= ?

    p/e ratio = ?

    b. stock price= ?

    p/e ratio = ?

    c. stock price=?

    e/p ratio = ?
  2. railbot railbot is offline

    Miami, FL
    United States

    Posts: 5,249
    Joined: Oct 07

    Mar 18th, 2009 (3/18/2009 7:22pm) in reply to Hallettcopta

    You ever been hit by a Zebra?

    invest the whole basket in one egg..

    Siri for the win..



    BAhhhhhhhhhhhhhhhhhhh
  3. Hallettcopta Hallettcopta is offline

    Raleigh, NC
    United States

    Posts: 3,343
    Joined: Jun 08

    Mar 18th, 2009 (3/18/2009 7:26pm) in reply to railbot

    i should expect answers like this i guess haha
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  4. Hallettcopta Hallettcopta is offline

    Raleigh, NC
    United States

    Posts: 3,343
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    Mar 18th, 2009 (3/18/2009 8:00pm) in reply to Hallettcopta

    anyone know how to even find the stock price for the first one? this would help :(
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  5. dams dams is offline

    MA
    United States

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    Mar 18th, 2009 (3/18/2009 8:02pm) in reply to Hallettcopta

    2.08
  6. Ma Zi Yi Ma Zi Yi is offline

    Posts: 1,477
    Joined: Aug 05

    Mar 18th, 2009 (3/18/2009 9:03pm) in reply to Hallettcopta

     
    Originally Posted by Hallettcopta View Post

    I have been staring at this homework problem for about 20 mins now and have no clue where to start or how to solve it. Any help or input is greatly appreciated. My textbook and notes are of no help to me as they are worthless.

    Castles in the Sand generates a rate of return of 19% on its investments and maintains a plowback ratio of 0.25. Its earnings this year will be $3.9 per share. Investors expect a 14% rate of return on the stock.

    1. Find the price and P/E ratio of the firm.
    2. What is the stock price and the P/E ratio if the plowback ratio is reduced to 0.2?
    3. If plowback equals zero, what is the stock price and the earnings-price ratio.
    a. stock price= ?

    p/e ratio = ?

    b. stock price= ?

    p/e ratio = ?

    c. stock price=?

    e/p ratio = ?

    If they get make 3.9 per share and keep 25% of it, how much do they pay out as a dividend 75% of 3.9? Can't you use the dividend and the expected return to find the stock price? then p/e would be stock price over eps
  7. Hallettcopta Hallettcopta is offline

    Raleigh, NC
    United States

    Posts: 3,343
    Joined: Jun 08

    Mar 18th, 2009 (3/18/2009 9:51pm) in reply to Ma Zi Yi

     
    Originally Posted by Ma Zi Yi View Post

     
    Originally Posted by Hallettcopta View Post

    I have been staring at this homework problem for about 20 mins now and have no clue where to start or how to solve it. Any help or input is greatly appreciated. My textbook and notes are of no help to me as they are worthless.

    Castles in the Sand generates a rate of return of 19% on its investments and maintains a plowback ratio of 0.25. Its earnings this year will be $3.9 per share. Investors expect a 14% rate of return on the stock.

    1. <LI>Find the price and P/E ratio of the firm. </LI> <LI>What is the stock price and the P/E ratio if the plowback ratio is reduced to 0.2? </LI> <LI>If plowback equals zero, what is the stock price and the earnings-price ratio. </LI>
    a. stock price= ?

    p/e ratio = ?

    b. stock price= ?

    p/e ratio = ?

    c. stock price=?

    e/p ratio = ?

    If they get make 3.9 per share and keep 25% of it, how much do they pay out as a dividend 75% of 3.9? Can't you use the dividend and the expected return to find the stock price? then p/e would be stock price over eps

    normally this is what you do, but this time a dividend isn't involved. I hadn't learned anything like this which is why i was confused. I ended up giving up on this problem and just turning it in blank. here's the answer it gave for A.

    <TABLE class=MsoNormalTable cellPadding=0 width=500 border=0><TBODY><TR><TD width="98%"><SPAN>g = 19% × 0.25 = 4.75%</SPAN></TD></TR><TR><TD><SPAN>P0 = $3.9(1 – 0.25)/(0.14 – 0.0475) = $31.62</SPAN></TD></TR><TR><TD><SPAN>P/E = $31.62/$3.9 = 8.11</SPAN></TD></TR></TBODY></TABLE>
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