It is January 2023 and you are the CFO of MetrixSystems Corp. The firm only pays dividends. The firm is expecting earnings per share (EPS) $10 at the end of this year. If the firm does not reinvest any of its earnings it will expect to achieve the same EPS of $10 each year in perpetuity You are considering changing the dividend policy of the firm. Specifically, you want the firm to target a payout rate of 20% each year. The firm's return on new investment is 12.5% and its cost of equity capital (r) is 12%. Calculate the share price under the proposed payout policy. Sele the best one. $93.75 O-$2,250 O $550 $83.33 $100
It is January 2023 and you are the CFO of MetrixSystems Corp. The firm only pays dividends. The firm is expecting earnings per share (EPS) $10 at the end of this year. If the firm does not reinvest any of its earnings it will expect to achieve the same EPS of $10 each year in perpetuity You are considering changing the dividend policy of the firm. Specifically, you want the firm to target a payout rate of 20% each year. The firm's return on new investment is 12.5% and its cost of equity capital (r) is 12%. Calculate the share price under the proposed payout policy. Sele the best one. $93.75 O-$2,250 O $550 $83.33 $100
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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![It is January 2023 and you are the CFO of MetrixSystems Corp. The firm only pays dividends. The firm is expecting earnings per share (EPS) of
$10 at the end of this year. If the firm does not reinvest any of its earnings it will expect to achieve the same EPS of $10 each year in perpetuity.
You are considering changing the dividend policy of the firm. Specifically, you want the firm to target a payout rate of 20% each year. The firm's
return on new investment is 12.5% and its cost of equity capital (r) is 12%. Calculate the share price under the proposed payout policy. Select
the best one.
$93.75
-$2,250
$550
$83.33
O $100](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb8579f89-451e-4b0c-a858-b042777b8cac%2Fc3e51b3f-d354-43e3-8cd4-42b3eba34232%2Fn7chci_processed.png&w=3840&q=75)
Transcribed Image Text:It is January 2023 and you are the CFO of MetrixSystems Corp. The firm only pays dividends. The firm is expecting earnings per share (EPS) of
$10 at the end of this year. If the firm does not reinvest any of its earnings it will expect to achieve the same EPS of $10 each year in perpetuity.
You are considering changing the dividend policy of the firm. Specifically, you want the firm to target a payout rate of 20% each year. The firm's
return on new investment is 12.5% and its cost of equity capital (r) is 12%. Calculate the share price under the proposed payout policy. Select
the best one.
$93.75
-$2,250
$550
$83.33
O $100
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