Question
i.Your DPS is Rs.0.55 out of EPS of Rs.1.25. The price of stock is Rs.10.50 per share. The value of total assets is Rs.9 million
i.Your DPS is Rs.0.55 out of EPS of Rs.1.25. The price of stock is Rs.10.50 per share. The value of total assets is Rs.9 million with 40% by debt. In preceding years, your return on equity (ROE) was 16%, with expectation to continue. (03)
a.Calculate the growth rate growth rate (growth rate = Retention rate x return on equity)
b.What is the required return on the stock?
c.If you change the dividend policy with an annual dividend of Rs.1.30 per share, what would be new growth rate and required return if everything else remains same?
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Investments
Authors: Zvi Bodie, Alex Kane, Alan Marcus, Stylianos Perrakis, Peter
8th Canadian Edition
007133887X, 978-0071338875
