Assume that the dividend payout ratio will be 55 % when the rate on long term government bonds falls to 9%. Since investors are becoming more risk averse, the equity risk premium will rise to 8% and investors will require a 7% return. The return on equity will be 13%. To what price will the market rise if the earnings expectation is $1.5? a. $138.42 b. $90.36 c. 71.74 d. 105.30 e. 85.14

Assume that the dividend payout ratio will be 55 % when the rate on long term government bonds falls to 9%. Since investors are becoming more risk averse, the equity risk premium will rise to 8% and investors will require a 7% return. The return on equity will be 13%. To what price will the market rise if the earnings expectation is $1.5? a. $138.42 b. $90.36 c. 71.74 d. 105.30 e. 85.14

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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