The Sharpe Co. just paid a dividend of $2.34 per share of stock. Its target payout ratio

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The Sharpe Co. just paid a dividend of $2.34 per share of stock. Its target payout ratio is 50 percent. The company expects to have earnings per share of $6.10 one year from now.

a. If the adjustment rate is .3 as defined in the Lintner model, what is the dividend one year from now?

b. If the adjustment rate is .6 instead, what is the dividend one year from now?

c. Which adjustment rate is more conservative? Why?

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Corporate Finance Core Principles And Applications

ISBN: 9781260571127

6th Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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Question Posted: Nov 13, 2020 04:57 AM

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The Sharpe Co. just paid a dividend of $2.34 per share of stock. Its target payout ratio

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a Using the formula from the text proposed by Lintner D 1 D 0 st EPS 1 D 0 ...View the full answer

Corporate Finance Core Principles And Applications

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