3. The earnings per share of a company is `16. The market capitalisation rate applicable to the company is 12.5%. Retained earnings can be employed to yield a return of 10%. The company is considering a payout of 25%, 50% and 75%. Which of these would maximize the wealth of the shareholders as per Walter’s Model? [C.S. Final June 1998]

[Ans. Price per share = `108.80, `115.20, `121.60]