Question

The market requires a return of 10% from XYZ, Inc. The firm plowback 80% of its earnings, and its return on equity and earnings per share are expected to be 12% and $6, respectively.

a. What will be XYZ's growth rate? (Input your answer as a nearest whole percent.)

Growth Rate = ?

b. Calculate XYZ's P/E ratio? (Do not round intermediate calculations.)

P/E Ratio = ?

Answer 1

Cell reference -

B C D Required Return Plowback ratio Return on equity Expected EPS 10% 80% 12% $6.00 XYZ's Growth rate 10% 9 b. Expected Dividend Market Price of Stock $1.20 $300.00 P/E ratio 50.0

Cell reference -

Required Return Plowback ratio Return on equity Expected EPS 0.1 0.8 0.12 7 a XYZ's Growth rate =C4*C3 b. 9 10 11 Expected Dividend Market Price of Stock C5*(1-3) =C9/(C2-C7) P/E ratio C10/05 13 14 15

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.