Assume a Company X's stock price today and cost of equity is consistent with the dividend...

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Answer 1

Answer #1

1.
RoE=NI/Book Value=1350/6750=20%
Dividend payout ratio=1-growth rate/RoE=1-12%/20%=0.4

2.
cost of equity=(1350*0.4*(1+12%)/135)/80+12%=17.6%
Hence, present value of dividend=1350/135*0.4*(1+12%)/(1+17.6%)=3.81

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Answer 2

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Assume a Company X's stock price today and cost of equity is consistent with the dividend...

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