The dividend policy of Scorpio Inc. has been recently changed to payout 40 percent of its earnings

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The dividend policy of Scorpio Inc. has been recently changed to payout 40 percent of its earnings to shareholders. The company has just paid dividends of $3 per share.

a. Calculate the growth rate of dividends if the return on equity is 12 percent.

b. Calculate the cost of equity capital if the market price of Scorpio Inc’s shares is $50.

c. Would you invest in this company if your required rate of return is 18 percent? Why?

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Foundations Of Finance

ISBN: 9781292155135

9th Global Edition

Authors: Arthur J. Keown, John D. Martin, J. William Petty

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Question Posted: Feb 21, 2024 05:01 AM

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The dividend policy of Scorpio Inc. has been recently changed to payout 40 percent of its earnings

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a To calculate the growth rate of dividends we need to use the formula Dividend Growth Rate Dividend ...View the full answer

Foundations Of Finance

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