Business, 24.04.2020 21:53 SuperWoman9172

Tricoat Paints’ most recent estimated) annual earnings are $3 per share, with a dividend payout ratio of 1/3. Suppose Tricoat plans to maintain this dividend payout ratio indefinitely and the annual dividend was just paid. Its beta is 1.25 and suppose its ROE is 9%. Suppose again that the risk-free rate is 6% and the expected annual market return is 14%. (a) At what price should Tricoat’s stock sell? (b) What is its current price-earnings ratio? (c) What is its present value of growth opportunities? (d) Suppose your research suggests that Tricoat will announce momentarily that it will immediately increase its dividend payout ratio to 2/3, yet the overall market is unaware of this development. Find the intrinsic value of the stock. Compare your answer to that of part (a) and describe why intrinsic value changed the way that it did.

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Tricoat Paints’ most recent estimated) annual earnings are $3 per share, with a dividend payout rati...

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