What is the correct answer of this financial accounting question following requirements? Rubenstein Bros. Clothing is expecting to pay an annual dividend per share of $0.9 out ofannual earnings per share of $5. Currently, Rubenstein Bros.'s stock is selling for $16.50 pershare. Adhering to the company's target capital structure, the firm has $8 million in totalinvested capital, of which 40% is funded by debt. Assume that the firm's book value ofequity equals its market value. In past years, the firm has earned a return on equity (ROE)of 19%, which is expected to continue this year and into the foreseeable future.a. Based on this information, what long-run growth rate can the firm be expected tomaintain?b. What is the stock's required return?

Step 1: Define Dividend Payout RatioA dividend payout ratio is a measure of the proportion of net…

Answered: Rubenstein Bros. Clothing is expecting…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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