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Question: Castles in the Sand generates a rate of return of 12% on its investments and maintains a plowback ratio of .50. Its earnings this year will be $5 per share. Investors expect a 10% 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.) Price $ P/E ratio

b. Find the price and P/E ratio of the firm, if the plowback ratio is reduced to .40? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price $ P/E ratio

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Category:- Basic Finance
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