A Company Can Generate an Return on Equity (ROE) of 12

question 4

Essay

A company can generate an return on equity (ROE) of 12% and has an earnings retention ratio of 0.80. Next year's earnings are projected at $100 million. If the required rate of return for the company is 10%, what is the company's tangible P/E value, franchise factor, growth factor, and franchise
P/E value?

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Definitions:

TR

Typically stands for Total Revenue, which is the total income received by a firm from the sale of its goods or services.

TFC

Total Fixed Costs (TFC) are the sum of all costs that remain constant regardless of the level of production or output in a company.

Marginal Revenue

The additional income that a company generates from selling one more unit of a good or service.

Average Variable Cost

The per-unit variable cost of production, calculated by dividing total variable costs by the quantity of output produced.