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Problem 19-16 Dividend Smoothing The Sharpe Company just paid a dividend of $1.60 per share of stock. Its target payout ratio is 40 percent. The
Problem 19-16 Dividend Smoothing
The Sharpe Company just paid a dividend of $1.60 per share of stock. Its target payout ratio is 40 percent. The company expects to have earnings per share of $4.83 one year from now. |
a. | If the adjustment rate is .4 as defined in the Lintner model, what is the dividend one year from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | If the adjustment rate is .7 instead, what is the dividend one year from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
c. | Which adjustment rate is more conservative? |
multiple choice .4 .7 |
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