A company has a dividend payout ratio of 0.6, is expected to grow at a constant rate of 4% per annum, and its shareholders require a return of 12% per annum on their investment. What should be the price- earnings ratio of this company? a. 7.5x b. 15x c. 6x d. 25x

A company has a dividend payout ratio of 0.6, is expected to grow at a constant rate of 4% per annum, and its shareholders require a return of 12% per annum on their investment. What should be the price- earnings ratio of this company? a. 7.5x b. 15x c. 6x d. 25x

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 24E: A company had WACC (weighted average cost of capital) equal to 8. % If the company pays off mortgage...

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Question

General accounting

A company has a dividend payout ratio of 0.6, is
expected to grow at a constant rate of 4% per annum,
and its shareholders require a return of 12% per
annum on their investment. What should be the price-
earnings ratio of this company?
a. 7.5x
b. 15x
c. 6x
d. 25x

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