Zeta Company recently paid a dividend of $4.00 $100.00 was the same as the company's historical average payout ratio. Also, analysts know the company's payout ratio has a standard deviation of (rounded) 10.0% per share and had earnings after taxes of per share. This dividend payout ratio Zeta's earnings have been growing rapidly years 5 $71.30 to the current level. The company expects this growth rate to continue for the next over the last from 3 4.0% years before slowing and leveling off to for the foreseeable future. Part 1: If the market requires a return of 13.0% value of the stock today? Part 2: If the market thinks Zeta's dividend payout ratio over the next 4 years might be closer to the lower end of their historic payout ratio, and demand a 68.2% confidence level for the dividends, what is the theoretical value of the stock today? (note: view each year as an independent event) Div/ (ROR-Growth) Dividends/Net Income Within one standard deviation either direction.

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
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See image below - This is all the information providedZeta
Company recently paid a dividend of $4.00 per share and
had earnings after taxes of $100.00, per share. This
dividend payout ratio was the same as the company's
historical average payout ratio. Also, analysts know the
company's payout ratio has a standard deviation of (
rounded)
Transcribed Image Text:See image below - This is all the information providedZeta Company recently paid a dividend of $4.00 per share and had earnings after taxes of $100.00, per share. This dividend payout ratio was the same as the company's historical average payout ratio. Also, analysts know the company's payout ratio has a standard deviation of ( rounded)
Zeta Company recently paid a dividend of
$4.00
$100.00
per share and had earnings after taxes of
per share. This dividend payout ratio
was the same as the company's historical average
payout ratio. Also, analysts know the company's
payout ratio has a standard deviation of (rounded)
10.0%
over the last
from
Zeta's earnings have been growing rapidly
5
$71.30
company expects this growth rate to continue for the next
years before slowing and leveling off to
for the foreseeable future.
3
4.0%
years
to the current level. The
Part 1: If the market requires a return of
13.0%
value of the stock today?
Part 2: If the market thinks Zeta's dividend payout ratio
over the next
4
lower end of their historic payout ratio, and demand a
68.2%
confidence level for the dividends, what
years might be closer to the
is the theoretical value of the stock today?
(note: view each year as an independent event)
Div/ (ROR Growth)
Dividends/Net Income
Within one standard deviation either direction
Transcribed Image Text:Zeta Company recently paid a dividend of $4.00 $100.00 per share and had earnings after taxes of per share. This dividend payout ratio was the same as the company's historical average payout ratio. Also, analysts know the company's payout ratio has a standard deviation of (rounded) 10.0% over the last from Zeta's earnings have been growing rapidly 5 $71.30 company expects this growth rate to continue for the next years before slowing and leveling off to for the foreseeable future. 3 4.0% years to the current level. The Part 1: If the market requires a return of 13.0% value of the stock today? Part 2: If the market thinks Zeta's dividend payout ratio over the next 4 lower end of their historic payout ratio, and demand a 68.2% confidence level for the dividends, what years might be closer to the is the theoretical value of the stock today? (note: view each year as an independent event) Div/ (ROR Growth) Dividends/Net Income Within one standard deviation either direction
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