Purchase Solution

Calculating price and price earning ratio in the given cases

Not what you're looking for?

Ask Custom Question

Castles in the Sand generates a rate of return of 15% on its investments and maintains a plowback ratio of .20. Its earnings this year will be $2 per share. Investors expect a 12% rate of return on the stock.

a. Find the price and P/E ratio of the firm. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. Find the price and P/E ratio of the firm, if the plowback ratio is reduced to .10? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Purchase this Solution

Solution Summary

The solution describes the steps to calculate price and price earning ratio in the given cases.

Solution Preview

a. Find the price and P/E ratio of the firm. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Current earnings=Eo=$2
Plowback ratio=b=0.20
Discount rate=k=12%
Rate of return=r=15%
Growth ...

Solution provided by:
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution


Free BrainMass Quizzes
Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.