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A company has a dividend payout 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 12% per annum on funds they have invested in the company. What should be the price-earnings ratio of this company? a. 8x b. 12x c. 7.5x d. 15x

A company has a dividend payout 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 12% per annum on funds they have invested in the company. What should be the price-earnings ratio of this company? a. 8x b. 12x c. 7.5x d. 15x

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter7: Analysis Of Financial Statements
Section: Chapter Questions
Problem 6P
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A company has a dividend payout 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 12% per annum on funds they have invested in the company. What should be the price-earnings ratio of this company? a. 8x b. 12x c. 7.5x d. 15x
Transcribed Image Text:A company has a dividend payout 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 12% per annum on funds they have invested in the company. What should be the price-earnings ratio of this company? a. 8x b. 12x c. 7.5x d. 15x
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