Suppose a firm has 1.5 billion shares outstanding and just reported a net income of $3 billion. The firm expects to maintain a dividend payout ratio of 60 percent on their earnings. If the firm's price-earnings ratio is 9.5, it leverage ratio is 4 and its return on equity is 8 percent, what is its required rate of return? (Please choose the closest answer) O a. 12.7 percent O b. 11.7 percent Oc. 9 percent O d. 7.7 percent O e. 9.7 percent
Suppose a firm has 1.5 billion shares outstanding and just reported a net income of $3 billion. The firm expects to maintain a dividend payout ratio of 60 percent on their earnings. If the firm's price-earnings ratio is 9.5, it leverage ratio is 4 and its return on equity is 8 percent, what is its required rate of return? (Please choose the closest answer) O a. 12.7 percent O b. 11.7 percent Oc. 9 percent O d. 7.7 percent O e. 9.7 percent
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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Transcribed Image Text:Suppose a firm has 1.5 billion shares outstanding and just reported a net income of $3 billion. The firm expects to maintain a
dividend payout ratio of 60 percent on their earnings. If the firm's price-earnings ratio is 9.5, it leverage ratio is 4 and its return
on equity is 8 percent, what is its required rate of return? (Please choose the closest answer)
Oa.
12.7 percent
O b. 11.7 percent
Oc. 9 percent
O d. 7.7 percent
O e. 9.7 percent
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