The stock of Nogro Corporation is currently selling for $28 per share. Earnings per share in the coming year are expected to be $7.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 25% rate of return per year. This situation is expected to continue indefinitely. Required: Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places. What would happen to its stock price if Nogro eliminated the dividend? Note: Round your answer to 2 decimal places.
The stock of Nogro Corporation is currently selling for $28 per share. Earnings per share in the coming year are expected to be $7.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 25%
Required:
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Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth
DDM , what rate of return do Nogro’s investors require?Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
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By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
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If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price?
Note: Round your answer to 2 decimal places.
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What would happen to its stock price if Nogro eliminated the dividend?
Note: Round your answer to 2 decimal places.
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