Homework Answers
Expected growth rate = ROE*Retention ratio
= 15%*45%
= 6.75%
b.P/E Ratio = 7.096
c.Price = 14*7.096 = $99.344
d.Price = Expected Dividend/(Required return – Growth rate)
= 14*55%/(14.5%-6.75%)
= $99.3548 per share
e.Value of Stock at 75% Retention ratio = 14*25%/(14.5% - 15*75%)
= $107.69
Hence, P/E Ratio = 107.69/14
= 7.6923
At 0% Retention, Price = 14/(14.5%-0)
= 96.5517
P/E Ratio = 6.8966
f.Hence retention ratio. Higher will be the P/E Ratio
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i need e & f
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PLEASE ASSIST WITH E and F
Setup: *the investor's required rate of return is14
percent
•the expected level of earnings at the end of this year
(Upper E 1E1) is $14,
• the retention ratio is 35 percent,
• the return on equity (ROE) is
16 percent (that is, it can earn
16 percent on reinvested earnings), and
• similar shares of stock sell at multiples of 7.738
times earnings per share.
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PLEASE ASSIST WITH E and F
Setup: *the investor's required rate of return is14
percent
•the expected level of earnings at the end of this year
(Upper E 1E1) is $14,
• the retention ratio is 35 percent,
• the return on equity (ROE) is
16 percent (that is, it can earn
16 percent on reinvested earnings), and
• similar shares of stock sell at multiples of 7.738
times earnings per share.
a. Determine the expected grth rate tor dividends....
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I just help with part D. I am having a tough time understanding
what I need to do, if you could explain it clearly that would be
much appreciated! Thank you!
(Measuring growth) Solarpower Systems earned $20 per share at the beginning of the year and paid out $9 in dividends to shareholders (so, Do = $9) and retained $11 to invest in new projects with an expected return on equity of 21 percent. In the future, Solarpower expects to...
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