header bg

Scan QR code or get instant email to install app


Pam Robers, CFA, is performing a valuation analysis on the common stock of Allstare Inc. The stock’s beta is 1.1, the risk-free rate is 5%, and the market risk premium is expected to be 8%. Allstare’s ROE is expected to be constant at 18%, and its dividend payout ratio has been fairly constant over time at 40%. The forward-earnings multiplier that Robers should use to estimate the current value of the shares is closest to:

A 13.

1212Required return = 5% + 1.1(8%) = 13.8%
Sustainable growth = 18%(1 - 0.4) = 10.8%


Leave a Reply

Your email address will not be published.