estimate how much higher the pe ratio would have been if it had been able to maintai 546308
Cracker Barrel, which operates restaurants and gift shops, reported dramatic growth in earnings and revenues between 1983 and 1992. During this period, earnings grew from $0.08 per share in 1983 to $0.78 per share in 1993. The dividends paid in 1993 amounted to only $0.02 per share. The earnings growth rate was expected to ease to 15% a year from 1994 to 1998 and to 6% a year after that. The payout ratio is expected to increase to 10% from 1994 to 1998 and to 50% after that. The beta of the stock is currently 1.55, but it is expected to decline to 1.25 for the 1994-98 time period and to 1.10 after that. The treasury bond rate is 7%.
a. Estimate the PE ratio for Cracker Barrel.
b. Estimate how much higher the PE ratio would have been, if it had been able to maintain the growth rate in earnings that it had posted between 1983 and 1993. (Assume that the dividend payout ratios are unaffected.)
c. Now assume that disappointing earnings reports in the near future lower the expected growth rate between 1994 and 1998 to 10%. Estimate the PE ratio. (Again, assume that the dividend payout ratio is unaffected.)
We've got everything to become your favourite writing service
Money back guarantee
Your money is safe. Even if we fail to satisfy your expectations, you can always request a refund and get your money back.
Confidentiality
We don’t share your private information with anyone. What happens on our website stays on our website.
Our service is legit
We provide you with a sample paper on the topic you need, and this kind of academic assistance is perfectly legitimate.
Get a plagiarism-free paper
We check every paper with our plagiarism-detection software, so you get a unique paper written for your particular purposes.
We can help with urgent tasks
Need a paper tomorrow? We can write it even while you’re sleeping. Place an order now and get your paper in 8 hours.
Pay a fair price
Our prices depend on urgency. If you want a cheap essay, place your order in advance. Our prices start from $11 per page.