Assume that the dividend payout ratio will be 75 percent when the rate on long term government bonds falls to 8 percent Because investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 15 percent return The return on equity will be 12 percent What is the expected sustainable growth rate What is your expectation of the market P E ratio As an economist for a research firm, you are forecasting the market P E ratio using the dividend discount model Because the economy has been slow for 5 years, you expect the dividend payout ratio to be 55 percent Long term government bond rates are at 6 percent, and the equity risk premium is estimated to be 3 percent Return on equity (ROE) is estimated to be 11 percent What is the expected growth rate What is your expectation of the market P E ratio The aggregate market currently has a retention ratio of 60 percent, a required rate of return of 12 percent, and an expected growth rate for dividends of 4 percent What is the current earnings multiplier If the payout ratio changes to 50 percent, but there are no other changes, what will be the new P E Left Aid Corporation Dividend per share$2 45 Total Asset Turnover 3 80 Net Profit Margin 6 50 EPS $3 50 Total Assets Equity 1 60 What is the Left Aid Corporation's return on equity (ROE) What is Left Aid Corporation's expected sustainable growth rate The growth rate of equity earnings without external financing is equal to Davenport Corporation's last dividend was $2 70, and the directors expect to maintain the historic 3 percent annual rate of growth You plan to purchase the stock today because you feel that the growth rate will increase to 5 percent for the next three years and the stock will then reach $25 per share How much should you be willing to pay for the stock if you require a 17 percent return How much should you be willing to pay for the stock if you feel that the 5 percent growth rate can be maintained indefinitely and you require a 17 percent return Suppose the current six year spot rate is 8 percent and the current five year spot rate is 7 percent What is the one year forward rate in five years

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Assume that the dividend payout ratio will be 75 percent when the rate on long-term government bonds falls to 8 percent. Because investors are becoming

Assume that the dividend payout ratio will be 75 percent when the rate on long-term government bonds falls to 8 percent. Because investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 15 percent return. The return on equity will be 12 percent.

What is the expected sustainable growth rate?
What is your expectation of the market P/E ratio?

As an economist for a research firm, you are forecasting the market P/E ratio using the dividend discount model. Because the economy has been slow for 5 years, you expect the dividend-payout ratio to be 55 percent. Long-term government bond rates are at 6 percent, and the equity risk premium is estimated to be 3 percent. Return on equity (ROE) is estimated to be 11 percent.

What is the expected growth rate?
What is your expectation of the market P/E ratio?

The aggregate market currently has a retention ratio of 60 percent, a required rate of return of 12 percent, and an expected growth rate for dividends of 4 percent.

What is the current earnings multiplier?
If the payout ratio changes to 50 percent, but there are no other changes, what will be the new P/E?

Left-Aid Corporation
Dividend per share$2.45
Total Asset Turnover 3.80
Net Profit Margin 6.50%
EPS $3.50
Total Assets/Equity 1.60

What is the Left-Aid Corporation's return on equity (ROE)?
What is Left-Aid Corporation's expected sustainable growth rate?
The growth rate of equity earnings without external financing is equal to

Davenport Corporation's last dividend was $2.70, and the directors expect to maintain the historic 3 percent annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 5 percent for the next three years and the stock will then reach $25 per share.

How much should you be willing to pay for the stock if you require a 17 percent return?
How much should you be willing to pay for the stock if you feel that the 5 percent growth rate can be maintained indefinitely and you require a 17 percent return?

Suppose the current six-year spot rate is 8 percent and the current five-year spot rate is 7 percent. What is the one year forward rate in five years?