Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jan 11, 2021

Suppose a firm's price/earnings ratio is 10. It expects to pay a dividend of $1.20 per share to maintain a 60 percent payout ratio. What

Suppose a firm's price/earnings ratio is 10. It expects to pay a dividend of $1.20 per share to maintain a 60 percent payout ratio. What is the firm's required return if its return on equity is 13.5 percent?

Step by Step Solution

★★★★★

3.46 Rating (172 Votes )

There are 3 Steps involved in it

Step: 1

RRR Expected dividend payment S... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance Applications and Theory

Authors: Marcia Cornett, Troy Adair

3rd edition

1259252221, 007786168X, 9781259252228, 978-0077861681

More Books

Students also viewed these Finance questions

Question

★★★★★

A firm is expected to pay a dividend of $2.05 next year and $2.35 the following year. Financial analysts believe the stock will be at their price target of $110 in two years. Compute the value of...

Answered: 1 week ago

Question

★★★★★

A firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at their price target of $68 in two years. Compute the value of this...

Answered: 1 week ago

Question

★★★★★

A stock is expected to pay a dividend of $1 per share in two months and in five months. The stock price is $50, and the risk-free rate of interest is 8% per annum with continuous compounding for all...

Answered: 1 week ago

Question

★★★★★

Tom Lamont, age 30, and Lin Lamont, age 31, have been married for six years. They got married right after Tom graduated from college. They have come to you for help in planning their financial...

Answered: 1 week ago

Question

★★★★★

Explain why the percent of markup based on selling greater than 100%.

Answered: 1 week ago

Question

★★★★★

InfoFree's website is linked to massive databases that consolidate personal data on millions of people. Users can purchase marketing lists of consumers broken down by location, age, income level,...

Answered: 1 week ago

Question

★★★★★

=+b) What is the best choice using the expected-value approach?

Answered: 1 week ago

Question

★★★★★

The Osborn Construction Company began operations January 2, 2007. During the year, Osborn entered into a contract with Redbeard Razor Corporation to construct a manufacturing facility. At that time,...

Answered: 1 week ago

Question

★★★★★

Problem 7 . 8 You are looking to purchase a Tesla Model x sport utility vehicle. The price of the vehicle is $ 9 6 , 7 5 0 . You negotiate a six - year loan, with no money down and no monthly...

Answered: 1 week ago

Question

★★★★★

Our client, Mathew Banks, was arrested last night by the Phoenix Police Department. The police found Mr. Banks' car pulled over on the side of the highway with him asleep or passed out inside. The...

Answered: 1 week ago

Question

★★★★★

M8-7 (Algo) Estimating Bad Debts Using the Percentage of Credit Sales Method [LO 8-2) Assume Simple Company had credit sales of $247,000 and cost of goods sold of $147,000 for the period. Simple uses...

Answered: 1 week ago

Question

★★★★★

The probability of event "A" is 50%. The probability of event "B" is 20%. "A" and "B" are two independent events. What is the probability of observing "A" and "B"?

Answered: 1 week ago

Question

★★★★★

Some statements are not considered hearsay because these statements are not being offered to prove the truth of the matter asserted in the statements. Thus, you must always ask yourself what is being...

Answered: 1 week ago

Question

★★★★★

21. Data: S0 = 100; X = 110; 1 + r = 1.1. The two possibilities for ST are 150 and 80. Calculate the value of a call option on the stock with an exercise price of 110. (Do not use continuous...

Answered: 1 week ago

Question

★★★★★

Car expenses using logbook and expense data Rory derives business income from a retail cosmetics store. On 1 October 2023, Rory bought a Mercedes for $38,340. Its effective life is eight years. Rory...

Answered: 1 week ago

Question

★★★★★

An analyst for Bloom Ltd, gathered the following information with regards to futures contract: Current spot-market price of R60 Risk-free interest rate of 8.87% per annum The six-month future...

Answered: 1 week ago

Question

★★★★★

Create a web form based application that accepts a number of each denomination of coin entered: dollars, quarters, dimes, nickels, and pennies. Validate the entries. None numbers may be converted to...

Answered: 1 week ago

Question

★★★★★

For what reason might an exporter use standard international trade documentation (letter of credit, draft, order bill of lading) on an intrafirm export to its parent or sister subsidiary?

Answered: 1 week ago

Question

★★★★★

Compute the price of a 5.6 percent coupon bond with 10 years left to maturity and a market interest rate of 7.0 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond?

Answered: 1 week ago

Question

★★★★★

Compute the future value in year 7 of a $2,000 deposit in year 1 and another $2,500 deposit at the end of year 4 using an 8 percent interest rate.

Answered: 1 week ago

Question

★★★★★

A preferred stock from Duquesne Light Company (DQUPRA) pays $3.55 in annual dividends. If the required return on the preferred stock is 6.7 percent, whats the value of the stock?

Answered: 1 week ago

Question

★★★★★

Fiero Products, LTD, of Bologna, Italy, makes a variety of footwear, including indoor slippers, childrens shoes, and flip-flops. To keep up with increasing demand, it is considering three expansion...

Answered: 1 week ago

Question

★★★★★

The Great Air Commuter Service Company started in 1984 to pro-vide efficient and inexpensive commuter travel between Boston and New York City. People in the airline industry know Peter Wilson, the...

Answered: 1 week ago

Question

★★★★★

Quite a few years ago, a popular show called Lets Make a Deal appeared on network television. Contestants were selected from the audience. Each contestant would bring some silly item that he or she...

Answered: 1 week ago

Previous Question Next Question