Quick answer of this accounting questions A company has a dividend payout ratio of 0.6, is expected to grow in thefuture at a rate of 6% per annum, and has shareholders who require a returnof 12% per annum on funds they have invested in the company. What shouldbe the price-earnings ratio of this company?a. 25xb. 10xc. 15xd. 30x

Step 1: Definition of Price-Earnings Ratio (P/E Ratio)The Price-Earnings Ratio (P/E Ratio) is a…

Answered: A company has a dividend payout ratio…

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 had WACC (weighted average cost of capital) equal to 8. % If the company pays off mortgage bonds with an interest rate of 4% and issues an equal amount of new stock considered to be relatively risky by the market, which of the following is true? a. residual income will increase. b. ROI will decrease. c. WACC will increase. d. WACC will decrease.
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A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years and then at a constant rate of 7% thereafter. The company’s stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock’s current price?
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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 6% 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. 25x b. 10x c. 15x d. 30x