Given a firm that that has $5 / year earnings, payout=100%, growth= 0%, dividend payout would...
Given a firm that that has $5 / year earnings, payout=100%, growth= 0%, dividend payout would equal $5 this year and now with the same firm, we still have $5 / year earnings, but say we change payout=60% and therefore the dividend payout would equal $3 this year. Assuming that the required return to shareholders was 15%, why when the fim pays a dividend of $5 the stock is worth much less than if the same firm pays $3 in dividends.
Homework Answers
Because the earnings are reinvested at higher rate than the required return leading to higher present value in case of dividends of $3
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Given a firm that that has $5 / year earnings, payout=100%,
growth= 0%, dividend payout would...
Estimating Growth A firm has a constant dividend payout ratio. Last year the firm had net...
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DFB, Inc. expects earnings next year of $5.01 per share, and it plans to pay a...
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Estimating Growth A firm has a constant dividend payout ratio. Last year the firm had net income of $30 million and paid out dividends of $6 million. The firm's return on equity is expected to be 13% for the foreseeable future. This stock's growth rate in dividends (g) should be
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