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A company has a dividend pay-out ratio of 0.6, is expected to grow in the future at a rate of 4% per annum, and has shareholders who require a return of 9% per annum on funds they have invested in the company. What should be the price-earnings ratio of this company? a. 30x b. 12x c. 6x d. 60x

A company has a dividend pay-out ratio of 0.6, is expected to grow in the future at a rate of 4% per annum, and has shareholders who require a return of 9% per annum on funds they have invested in the company. What should be the price-earnings ratio of this company? a. 30x b. 12x c. 6x d. 60x

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
8th Edition
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter8: Risk And Rates Of Return
Section: Chapter Questions
Problem 6DQ
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Subject: financial accounting

A company has a dividend pay-out ratio of 0.6, is expected to grow in the future at a rate of 4% per annum, and has shareholders who require a return of 9% per annum on funds they have invested in the company. What should be the price-earnings ratio of this company? a. 30x b. 12x c. 6x d. 60x
Transcribed Image Text:A company has a dividend pay-out ratio of 0.6, is expected to grow in the future at a rate of 4% per annum, and has shareholders who require a return of 9% per annum on funds they have invested in the company. What should be the price-earnings ratio of this company? a. 30x b. 12x c. 6x d. 60x
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