What should be the price earnings ratio of this company on these general accounting question? A company has a dividend payout ratio of 0.7, is expected to grow inthe future at a rate of 5% per annum, and has shareholders whorequire a return of 10% per annum on funds they have invested in thecompany. What should be the price-earnings ratio of this company?a. 35xb. 14xc. 7xd. 70x

The formula for the Price-to-Earnings (P/E) ratio using the Dividend Payout Ratio and the growth…

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

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 5MC

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A company has a dividend payout ratio of 0.7, is expected to grow in the future at a rate of 5% per annum, and has shareholders who require a return of 10% per annum on funds they have invested in the company. What should be the price-earnings ratio of this company? a. 35x b. 14x c. 7x d. 70x