The Risk-Free Rate of Return Is 10 Percent,and the Expected

question 40

Essay

The risk-free rate of return is 10 percent,and the expected return for the stock market is 16 percent.Evergreen Industries has a beta of 1.1,and investors expect dividends and earnings to grow at an 8 percent rate per year.The current dividend is $1.20,and the payout ratio is 50 percent.
(a)Calculate the P/E ratio for Evergreen Industries.
(b)Estimate the price of the stock for the next year using the multiplier model.

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Definitions:

Lewin's Approach

A model of change developed by Kurt Lewin, which includes the stages of unfreezing, changing, and refreezing to facilitate successful change implementation.

Thawing

The process of something frozen, such as ice or snow, becoming liquid or soft as it warms.

Refreezing

The final stage in the process of change, where new behaviors are solidified and integrated into normal operations.

Change Competency

The ability of an organization or individual to effectively adapt to new conditions or changes in the environment.