vestor gathers the following data about th ROE 15% Retention Ratio 70% Required Return on Shares 12% Next Year's EPS $5 Answer the questions and provide calculations: A. What is the sustainable growth rate of the comp B. justified trailing P/E is closest to: C. justified forward P/E is closest to: D. If the industry justified leading P/E ratio is 18 is under/overvalued?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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An investor gathers the following data about the LOR,Inc:
ROE 15%
Retention Ratio 70%
Required Return on Shares 12%
Next Year's EPS $5
Answer the questions and provide calculations:
A. What is the sustainable growth rate of the company?
B. justified trailing P/E is closest to:
C. justified forward P/E is closest to:
D. If the industry justified leading P/E ratio is 18 is the stock of the company fairly valued,
under/overvalued?
E. What is the companies PEG ratio based on justified forward P/E?
Transcribed Image Text:An investor gathers the following data about the LOR,Inc: ROE 15% Retention Ratio 70% Required Return on Shares 12% Next Year's EPS $5 Answer the questions and provide calculations: A. What is the sustainable growth rate of the company? B. justified trailing P/E is closest to: C. justified forward P/E is closest to: D. If the industry justified leading P/E ratio is 18 is the stock of the company fairly valued, under/overvalued? E. What is the companies PEG ratio based on justified forward P/E?
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