Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN: 9781337902571
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 4TCL
Summary Introduction
To explain: Whether the P/E ratio of the company is well above or well below its latest 5-year average, the reason of P/E ratio of the given company deviates from its historical trend, and whether the stock prices of the given company is undervalued or overvalued on the basis of its P/E ratio.
Introduction:
Profit Earning Ratio (P/E Ratio): It refers to the ratio between the price of a share of the company and the earnings on that share, which is earning per share of the company. In other words, it can be defined as the ratio between the price per share of the company and its earnings per share.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Some parts of the balance sheet and income statement of PaintsWorld Enterprises is given below.
You know that the effective tax rate is 23.0% and the interest rate the company pays on its long-term debt is 11.0%.
You also know that the outstanding debt has been constant over the past few years.
1.Find the leverage ratio in 2022:
2. Find the asset turnover for 2022:
Loreto Inc. has the following financial ratios: asset turnover = 1.60; net profit margin (i.e., net income/sales) = 6%; payout ratio = 30%; equity/assets = 0.50.
Â
a. What is Loreto's sustainable growth rate?
b. What is its internal growth rate?
(Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
 A. Sustainable growth rate  _______%
B. Internal growth rate ______%
You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that
Lauryn's has a reported equity beta of 1.5, a debt-to-equity ratio of .4, and a tax rate of 21 percent. Based on this
information, what is the asset beta for Lauryn's? (Do not round intermediate calculations. Round your answer to
2 decimal places.)
Answer is complete but not entirely correct.
Lauryn's asset
1.22 x
beta
Chapter 9 Solutions
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Ch. 9.A - For a stock to be in equilibrium, what two...Ch. 9.A - Prob. 2QCh. 9.A - RATES OF RETURN AND EQUILIBRIUM Stock Cs beta...Ch. 9.A - 9A-2 EQUILIBRIUM STOCK PRICE The risk-free rate of...Ch. 9.A - 9A-3 BETA COEFFICIENTS Suppose Chance Chemical...Ch. 9 - It is frequently stated that the one purpose of...Ch. 9 - Is the following equation correct for finding the...Ch. 9 - Prob. 3QCh. 9 - Two investors are evaluating GEs stock for...Ch. 9 - A bond that pays interest forever and has no...
Ch. 9 - Discuss the similarities and differences between...Ch. 9 - Prob. 7QCh. 9 - How do non-operating assets impact a firms...Ch. 9 - DPS CALCULATION Weston Corporation just paid a...Ch. 9 - CONSTANT GROWTH VALUATION Tresnan Brothers is...Ch. 9 - CONSTANT GROWTH VALUATION Holtzman Clothierss...Ch. 9 - NONCONSTANT GROWTH VALUATION Holt Enterprises...Ch. 9 - CORPORATE VALUATION Scampini Technologies is...Ch. 9 - PREFERRED STOCK VALUATION Farley Inc. has...Ch. 9 - Prob. 7PCh. 9 - PREFERRED STOCK VALUATION Earley Corporation...Ch. 9 - PREFERRED STOCK RETURNS Avondale Aeronautics has...Ch. 9 - Prob. 10PCh. 9 - Suppose you believe that the economy is just...Ch. 9 - Prob. 12PCh. 9 - CONSTANT GROWTH You are considering an investment...Ch. 9 - NONCONSTANT GROWTH Computech Corporation is...Ch. 9 - Prob. 15PCh. 9 - NONCONSTANT GROWTH Carnes Cosmetics Co.s stock...Ch. 9 - CONSTANT GROWTH Your broker offers to sell you...Ch. 9 - NONCONSTANT GROWTH STOCK VALUATION Taussig...Ch. 9 - Prob. 19PCh. 9 - CORPORATE VALUE MODEL Assume that today is...Ch. 9 - NONCONSTANT GROWTH Assume that it is now January...Ch. 9 - Comprehensive/Spreadsheet Problem NONCONSTANT...Ch. 9 - Prob. 23ICCh. 9 - Prob. 1TCLCh. 9 - Prob. 2TCLCh. 9 - Prob. 3TCLCh. 9 - Prob. 4TCLCh. 9 - Prob. 5TCLCh. 9 - Prob. 6TCLCh. 9 - Prob. 7TCLCh. 9 - Prob. 8TCLCh. 9 - Prob. 9TCL
Knowledge Booster
Similar questions
- You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.7, a debt-to-equity ratio of 0.7, and a tax rate of 20 percent. Based on this information, what is the asset beta for Lauryn's? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Lauryn's asset betaarrow_forwardFor the return on equity (ROE) and return on assets (ROA) ratios, perform a DuPont decomposition andanalyze the components of the ratios in both years. Comment on which components of the ROE and ROAratios are driving the changes in the ratios you observe. Here is my ROE for years 2021 (1728.1 / 11,951.5= 14.5%) and 2020 (1066.8 / 9759.1= 11.3%) Here is my ROA for 2021 (1728.1 / 13,555) * 100 = 12.7488% and 2020 (1066.8 / 11,168.9) * 100 = 9.5515%arrow_forwardWarren Exploration Company reported these figures for 2024 and 2023: (Click the icon to view the figures.) Compute the rate of return on total assets for 2024. (Round to two decimals.) Select the formula, then enter the amounts to compute the rate of return on total assets for 2024. (Enter the rate of return as a percent rounded to two decimal places, X.XX%.) = Rate of return on total assets + = C % Data table Income Statement-partial: Interest Expense Net Income Balance Sheet-partial: Total Assets Print $ $ 2024 12,800,000 $ 20,400,000 Dec. 31, 2024 314,000,000 $ Done 2023 17,800,000 17,200,000 Dec. 31, 2023 312,000,000 Xarrow_forward
- Compute the following ratios. Note: Use a 360-day year. Do not round intermediate calculations. Input your profit margin, return on assets, return on equity, and debt to total assets answers as a percent rounded to 2 decimal places. Round all other answers to 2 decimal places.                                        Jones Corp           Smith Corp Find the profit margin, return on assets(investments), return on equity, receivable turnover, average collection period, inventory turnover, fixed asset turnover, total asset turnover, current ratio, quick ratio, debt to total assets, times interest earned, and fixed charge coverage. For each Corporation.arrow_forwardPercentages need to be entered in decimal format, for instance 3% would be entered as .03.  2.Ultimate Electric, Inc. has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market.  As a result, Ultimate is expected to experience a 15% annual (nonconstant) growth rate for the next five years (supernormal period).  When the five-year period ends, other firms will have developed comparable technology, and Ultimate's growth rate will slow to 5% per year (constant) indefinitely.  Stockholders require a return of 12% on Ultimate's stock.  The firms's most recent annual dividend (D0), which was paid yesterday, was $1.75 per share.  What is the current price (P0) of the stock today?  What is the market value (price) at the end of Year 3.Consider the scenario in Question 2 and suppose your boss believes that Ultimate's annual nonconstant growth rate will only be 12% during the next five years and that the firm's normal growth rate…arrow_forwardFinancial statements Net operating revenues Operating expenses Operating income Non-operating items: Interest expense Other Net income Total assets Total shareholders' equity S 2020 33.8 28.9 4.9 (1.2) (0.6) 3.1 $ $ 200.0 78.0 - Xarrow_forward
- Percentages need to be entered in decimal format, for instance 3% would be entered as .03.  2.Ultimate Electric, Inc. has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market.  As a result, Ultimate is expected to experience a 15% annual (nonconstant) growth rate for the next five years (supernormal period).  When the five-year period ends, other firms will have developed comparable technology, and Ultimate's growth rate will slow to 5% per year (constant) indefinitely.  Stockholders require a return of 12% on Ultimate's stock.  The firms's most recent annual dividend (D0), which was paid yesterday, was $1.75 per share.  What is the current price (P0) of the stock today?  What is the market value (price) at the end of Year 5? 3. Consider the scenario in Question 2, what is the dividend yield in Year 1 and Year 5?  What is the expected capital gains yield in Year 1 and Year 5?  What is the expected total return (dividend…arrow_forwardPercentages need to be entered in decimal format, for instance 3% would be entered as .03. i don't need help with the first question. I added it because it it says refer to the 1st question.the last three are the ones I need help with  Ultimate Electric, Inc. has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market.  As a result, Ultimate is expected to experience a 15% annual (nonconstant) growth rate for the next five years (supernormal period).  When the five-year period ends, other firms will have developed comparable technology, and Ultimate's growth rate will slow to 5% per year (constant) indefinitely.  Stockholders require a return of 12% on Ultimate's stock.  The firms's most recent annual dividend (D0), which was paid yesterday, was $1.75 per share.  What is the current price (P0) of the stock today?  What is the market value (price) at the end of Year 5? Consider the scenario in Question 2, what is the…arrow_forwardAn analyst is evaluating the profi tability of Daimler AG (Xetra: DAI) over a recentfi ve-year period. He gathers the following revenue data and calculates the followingprofi tability ratios from information in Daimler’s annual reports:2009 2008 2007 2006 2005Revenues (€ millions) 78,924 98,469 101,569 99,222 95,209Gross profi t margin 16.92% 21.89% 23.62% 20.60% 19.48%Operating profi t (EBIT) margin a–1.92% 2.77% 8.58% 5.03% 3.02%Pretax margin –2.91% 2.84% 9.04% 4.94% 2.55%Net profi t margin –3.35% 1.73% 4.78% 3.19% 2.37%aEBIT (Earnings before interest and taxes) is the operating profi t metric used by Daimler.Daimler’s revenue declined from 2007 to 2008 and from 2008 to 2009. Further,Daimler’s 2009 revenues were the lowest of the fi ve years. Management’s discussion ofthe decline in revenue and EBIT in the 2009 Annual Report notes the following:Th e main reason for the decline [in EBIT] was a signifi cant drop in revenuedue to markedly lower unit sales in all vehicle segments as a…arrow_forward
- Toby’s forecasted 2021 financial statements follow, along with some industry average ratios. Calculate Toby’s 2021 forecasted ratios and fill in the above table. Calculate the EPS and DPS. The company has a 40% payout ratio.  Please provide the solutions for the EPS, DPS, Days Sales Outstanding, Fixed Asset Turnover, Total Asset Turnover, Return on Assets, Return on Equity, Total Debt Ratio, Profit Margin on Sales, P/E Ratio.arrow_forwardPercentages need to be entered in decimal format, for instance 3% would be entered as .03. Only need the last two questions answered. I added the first one because it says to refer to that question 2. Ultimate Electric, Inc. has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market.  As a result, Ultimate is expected to experience a 15% annual (nonconstant) growth rate for the next five years (supernormal period).  When the five-year period ends, other firms will have developed comparable technology, and Ultimate's growth rate will slow to 5% per year (constant) indefinitely.  Stockholders require a return of 12% on Ultimate's stock.  The firms's most recent annual dividend (D0), which was paid yesterday, was $1.75 per share.  What is the current price (P0) of the stock today?  What is the market value (price) at the end of Year 5? 3. Consider the scenario in Question 2 and suppose your boss believes that Ultimate's annual…arrow_forwardYou are trying to value Lucid Motors using comparables analysis. You believe Lucid Motors should be valued similarly to TSLA and that TSLA is the only reasonable comparison. TSLA is currently trading at 10.7x Enterprise Value/Revenue. Lucid is expected to generate $2.2bn in revenues this year. How mucb should you be willing to value Lucid in terms of enterprise Value (assuming market is correct)?  $20.6bn $23.5bn $15.4 bn $21.7 bnarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781285065137Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningFundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningFundamentals of Financial Management, Concise Edi...FinanceISBN:9781305635937Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals Of Financial Management, Concise Edi...
Finance
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning