Entity A's expected return on equity (ROE) is 8%, and its dividend propensity is 30%. Let's say the company's net profit at the end of 2013 is $500. Let's assume that in the future, the company will not increase its equity capital through the issuance of new shares. The entity's equity capital expense (rs) is 8%. 1) Seek dividends and reserved profits at the end of 2013. 2) Look for dividends and reserved profits from 2014 to 2016. 3) ROE is 6% and dividend propensity is 40%. Find the value of this company's equity capital at the end of 2013.
Entity A's expected return on equity (ROE) is 8%, and its dividend propensity is 30%. Let's say the company's net profit at the end of 2013 is $500. Let's assume that in the future, the company will not increase its equity capital through the issuance of new shares. The entity's equity capital expense (rs) is 8%. 1) Seek dividends and reserved profits at the end of 2013. 2) Look for dividends and reserved profits from 2014 to 2016. 3) ROE is 6% and dividend propensity is 40%. Find the value of this company's equity capital at the end of 2013.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Entity A's expected
1) Seek dividends and reserved profits at the end of 2013.
2) Look for dividends and reserved profits from 2014 to 2016.
3) ROE is 6% and dividend propensity is 40%. Find the value of this company's equity capital at the end of 2013.
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