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

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

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

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

c. If you require a 18 percent return, should you invest in the firm? Why?

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Foundations Of Finance

ISBN: 9781292318738

10th Global Edition

Authors: Arthur Keown, John Martin, J. Petty

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Question Posted: Apr 15, 2024 03:00 AM

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

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a To calculate the growth rate we can use the retention ratio and the return on equity ROE The reten...View the full answer

Foundations Of Finance

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