9. What is the plowback ratio for a firm that has earnings per share of $20...

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9. What is the plowback ratio for a firm that has earnings per share of $20 and pays out $5 per share as dividend payment? A)

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Answer 1

Answer #1

1.

Plowback Ratio = (20 - 5)/20 = 75%

2.

Risk Premium on Stock = 1.50(0.20)

Risk Premium on Stock = 30.0%

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Answer 2

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