Reading 43: Market-Based Valuation: Price Multiples- LOS about, growth, return, Jackson, following

youzizhang

 

Q18. An analyst has gathered the following data about Jackson, Inc.:

• Payout ratio = 60%.
• Expected growth rate in dividends = 6.7%.
• Required rate of return = 12.5%.

What will be the appropriate price-to-book value (PBV) ratio for Jackson, based on fundamentals?

A)   0.58.

B)   1.73.

C)   1.38.

 

Q19. A firm has a payout ratio of 35%, a return on equity (ROE) of 18%, an estimated growth rate of 13%, and its shareholders require a return of 17% on their investment. Based on these fundamentals, a reasonable estimate of the appropriate price-to-book value ratio for the firm is:

A)   1.25.

B)   2.42.

C)   1.58.

 

Q20. What is the justified trailing price-to-earnings (P/E) multiple of a stock that has a payout ratio of 40% if the shareholders require a return of 16% on their investment and the expected growth rate in dividends is 6%?

A)   4.00.

B)   4.24.

C)   6.36.

 

Q21. The Farmer Co. has a payout ratio of 65% and a return on equity (ROE) of 16% (assume that this is expected ROE for the upcoming year). What will be the appropriate price-to-book value (PBV) based on return differential if the expected growth rate in dividends is 5.6% and the required rate of return is 13%?

A)   1.48.

B)   0.71.

C)   1.41.

youzizhang

 

 

Q18. An analyst has gathered the following data about Jackson, Inc.:fficeffice" />

• Payout ratio = 60%.
• Expected growth rate in dividends = 6.7%.
• Required rate of return = 12.5%.

What will be the appropriate price-to-book value (PBV) ratio for ffice:smarttags" />Jackson, based on fundamentals?

A)   0.58.

B)   1.73.

C)   1.38.

Correct answer is B)

Return on equity (ROE) = g / (1 ? payout ratio) = 0.067 / 0.40 = 0.1675 or 16.75%.

Based on fundamentals:
PBV = (0.1675 ? 0.067) / (0.125 ? 0.067) = 1.73.

 

Q19. A firm has a payout ratio of 35%, a return on equity (ROE) of 18%, an estimated growth rate of 13%, and its shareholders require a return of 17% on their investment. Based on these fundamentals, a reasonable estimate of the appropriate price-to-book value ratio for the firm is:

A)   1.25.

B)   2.42.

C)   1.58.

Correct answer is A)

 

Q20. What is the justified trailing price-to-earnings (P/E) multiple of a stock that has a payout ratio of 40% if the shareholders require a return of 16% on their investment and the expected growth rate in dividends is 6%?

A)   4.00.

B)   4.24.

C)   6.36.

Correct answer is B)

P₀/E₀ = (0.40 × 1.06) / (0.16 – 0.06) = 4.24

 

Q21. The Farmer Co. has a payout ratio of 65% and a return on equity (ROE) of 16% (assume that this is expected ROE for the upcoming year). What will be the appropriate price-to-book value (PBV) based on return differential if the expected growth rate in dividends is 5.6% and the required rate of return is 13%?

A)   1.48.

B)   0.71.

C)   1.41.

Correct answer is C)

Based on return differential:
P₀ / BV₀ = (ROE₁ ? g) / (r ? g) = (0.16 ? 0.056) / (0.13 ? 0.056) = 1.41.

 

[此贴子已经被作者于2009-3-9 17:09:33编辑过]

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