Sharpe SA has just paid a dividend of 1.25 per share of equity. Its target payout ratio
Question:
Sharpe SA has just paid a dividend of €1.25 per share of equity. Its target payout ratio is 40 per cent. The company expects to have an earnings per share of €4.50 one year from now.
(a) If the adjustment rate is 0.3 as defined in the Lintner model, what is the dividend one year from now?
(b) If the adjustment rate is 0.6 instead, what is the dividend one year from now?
(c) Which adjustment rate is more conservative? Why?
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Step by Step Answer:
a Using the Lintner model the dividend one year from now can be calculated as follows D1 D0 1 EPS1 P...View the full answer
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Related Book For 
Corporate Finance
ISBN: 9780077173630
3rd Edition
Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe
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