12. The stock of Nogro Corporation is currently selling for $10 per share. Earnings per share in the coming year are expected to be $2. The company has a policy of paying out 50% of its earn- ings each year in dividends. The rest is retained and invested in projects that carn a 20% rate of return per year. This situation is expected to continue indefinitely a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of retum do Nogro's investors require? b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? c. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? What if Nogro eliminated the dividend? Chapter 19 7. Use the DuPont system and the following data to find return on equity. 2.2 Leverage ratio (assets/equity) Total asset turnover Net profit margin Dividend payout ratio 2.0 5.5% 31.8% 15. Here are data on two firms. Equity ($ million) Debt ($ million) ROC (%) Cost of Capital (%) 9% Acme Apex 100 450 50 150 17% 15% 10% a. Which firm has the higher economic value added? b. Which has the higher economic value added per dollar of invested capital