Answer: Correct option is 5%
Growth =ROE*(1-dividend payout ratio)
Dividend payout ratio=Expected dividend/Expected EPS=2/3
Return on new investments or ROE=15%
Growth =15%*(1-2/3)=0.05 or 5%
pugu QUESTION 18 1 p You expect KT Industries (KTI) will have earnings per share of...
You expect KT industries (KTI) will have earnings per share of $ 4 this year and expect that they will pay out $ 1.00 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 15% and their equity cost of capital is 12%. The expected growth rate for KTI's dividends is closest to: a: 6.8 b. 11.3 c.4.5 d. 9
You expect KT industries (KTI) will have earnings per share of $ 4 this year and expect that they will pay out $ 1.75 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 14% and their equity cost of capital is 10%. The value of a share of KTI's stock is closest to: A.$32.94 B.$98.82 C.$82.35 D.$ 49.41
Which of the following statements is FALSE regarding profitable and unprofitable growth? If the firm retains more earnings, it will bea able to pay out less of those earnings, which means that the firm will have to reduce its dividend. A firm can increase its growth rate by retaining more of its earnings. Cutting the firm's dividend to increase investment will raise the stock price if. and only if, the new investments have a positive net present value (NPV). If...
QUESTION 17 1 p Microsoft presently pays no dividend. You anticipate Microsoft will pay an annual dividend of $0.60 per share two years from today and you expect dividends to grow by 4% per year thereafter. IF Microsoft's equity cost of capital is 12%, then the value of a share of Microosfoft today is: O $5.00 O O $6.70 O $6.25 O $6.90 O QUESTION 18 1 p You expect KT Industries (KTI) will have earnings per share of $3...
You expect that Cargo Industries will have earnings of $3 per share in the coming year and expect that they will pay out $1.50 of these earnings in the form of a dividend one year from today. Cargo’s ROE is 15%, and their cost of equity capital is 12%. The value of a share of Cargo stock is closest to: A. $25.00 B. $29.26 C. $33.33 D. $35.83 E. $37.50
uestion 7 O out of 2 points You expect Canyon Buff Corp wil have earnings per share of this year and expect that they will pay out $150 of these earnings to shareholders in the form of a dividend. Canyon Buff's x return on new investments is 15 and their equity cost of capital is 12%. The value of a share of Canyon Buff's stock is closest to Selected Answer: D. $12.50 Question 8 O out of 2 points
DFB, Inc. expects earnings this year of $4.49 per share, and it plans to pay a $2.55 dividend to shareholders at that time (one year from now). DFB will retain $1.94 per share of its earnings to reinvest in new projects that have an expected return of 15.4% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. a. What...
DFB, Inc. expects earnings this year of $4.02 per share, and it plans to pay a $2.27 dividend to shareholders at that time (one year from now). DFB will retain $1.75 per share of its earnings to reinvest in new projects that have an expected return of 14.6% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. a. What...
no growth industries presently pays an annual dividend of $1.50 per share and it is expected that these dividend payments will continue indefinitely. if nogrowths equity cost of capital is 9%, then the value of a share of nogrowths stock is closest to: O A. $18.34 O B. $16.67 O C. $20.00 O D. $13.34
CH7 1. Laurel Enterprises expects earnings next year of $3.84 per share and has a 50% retention rate, which it plans to keep constant. Its equity cost of capital is 1 1%, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 5.5% per year If its next dividend is due in one year, what do you estimate the firm's current stock price to be? 2, Laurel Enterprises expects earnings...