Question #21

of 140 The Lewis Corp. had revenue per share of $300 in 2001, earnings per share of $4.50, and paid out 60% of its earnings as dividends. If the return on equity (ROE) and required rate of return of Lewis are 20% and 13% respectively, what is the appropriate price/sales (P/S) multiple for Lewis? A) 0.12. B) 0.18. C) 0.19. An analyst has gathered the following fundamental data: Firm A Firm A Firm B Firm B Strategy High Margin Low Volume Low Margin High Volume High Margin Low Volume Low Margin High Volume Payout Ratio 40% 40% 40% 40% Required Rate of Return 11% 11% 11% 11% Growth Rate in Dividends 9% 5% 5% 7% Sales/Book Value of Equity 1.5 4.5 1.0 3 Profit Margin 10% 2% 9% 4% Book Value $150 $150 $125 $125