Question
1. An analyst found a companys current dividend is $0.58 per share. The earnings per share is $1.81. Calculate the companys DPR and plowback ratio.
1. An analyst found a companys current dividend is $0.58 per share. The earnings per share is $1.81. Calculate the companys DPR and plowback ratio.
2. A firm decides to invest in a new project. As a result, it projects an ROE of 20%, and it will maintain a plowback ratio of 30%. Its earnings next year will be $2 per share. Investors expect a 12% rate of return on the stock. a. At what price would you expect the firm to sell? b. What is the present value of growth opportunities? c. What would be the present value of growth opportunities if the firm planned to reinvest only 20% of its earnings? Explain briefly the economic reason for the different PVGO in part b and c.
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Personal Finance Turning Money into Wealth
Authors: Arthur J. Keown
7th edition
978-0133856507, 013385650X, 133856437, 978-0133856439
