Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Sharpe Co. just paid a dividend of $1.50 per share of stock. Its target payout ratio is 50 percent. The company expects to have

The Sharpe Co. just paid a dividend of $1.50 per share of stock. Its target payout ratio is 50 percent. The company expects to have an earnings per share of $4.92 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.)

Dividend $

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.)

Dividend $

c. Which adjustment rate is more conservative?
.4

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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

blur-text-image

Step: 3

blur-text-image

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

The Routledge International Handbook Of Financialization

Authors: Philip Mader, Daniel Mertens, Natascha Van Der Zwan

1st Edition

1138308218, 978-1138308213

More Books

Students also viewed these Finance questions