Please help by providing step by step process for the following: Thank you in advance, the...
Please help by providing step by step process for the following: Thank you in advance, the answer has been provided for further assistance.
Cisco's (CSCO) long-term strategic plan indicates that the company will generate earn a return on equity (ROE) of 33.31%. The plan also indicates that management intends to pay out 31% of all earnings as dividends. What is CSCO's sustainable growth rate?
Answer: 0.2298
A preferred stock with a $1,000 par value pays an annual dividend rate of 5.12%. Based on its current market price per share, investors are demanding a 5% return to invest in the preferred stock. What must be the market price per share of the preferred stock?
Answer: 1024
Homework Answers
1)
sustainable growth rate = ROE * (1- dividend payout ratio)
= 33.1% * (1-0.31)
= 0.2298
2)
market price = annual dividend/cost of preferred stock
market price = 51.2/0.05
= 1024
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