Low Tech Chip Company Is Expected to Have EPS of $2.50

question 67

Multiple Choice

Low Tech Chip Company is expected to have EPS of $2.50 in the coming year .The expected ROE is 14%.An appropriate required return on the stock is 11%.If the firm has a dividend payout ratio of 40%,the intrinsic value of the stock should be

• A)$22.73
• B)$27.50
• C)$28.57
• D)$38.46
• E)none of the above

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Definitions:

Accounts Payable Turnover Ratio

A liquidity ratio that measures how many times a company pays off its suppliers over a period.

Accounts Payable

Money owed by a business to its suppliers or creditors for goods or services received.

Inventory

The raw materials, work-in-process products, and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

Interest-Bearing Note

A debt instrument that pays interest to the holder until the maturity date, at which point the principal is repaid.