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Company C has a cost of capital of 9% per year. Its expected EPS next year is 5,000 Won. The firm plans to use 40%
Company C has a cost of capital of 9% per year. Its expected EPS next year is 5,000 Won. The firm plans to use 40% of its earnings for new investments in the following years. The ROE on the new investments is 11%. (10)
C. Calculate the share price and the P/E ratio of this firm.
D. What will be your advice to this firm on its dividend policy? If necessary, state assumptions you use to justify your explanation.
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