Question
XYZ Inc. has been reinvesting 60% of earnings into a project that yields a return of 12%. The dividend yield is expected to be 3%
XYZ Inc. has been reinvesting 60% of earnings into a project that yields a return of 12%. The dividend yield is expected to be 3% next year. The current share price of XYZ Inc. is $120 / share.
- (c)Now XYZ Plc. announces that it will reinvest 80% of its earnings for the next 5 years. Starting in Year 6, the company will again be able to pay out 40% of its earnings. What will XYZ'sshare price be once this announcement is made?
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Managerial Accounting
Authors: John J Wild, Ken W. Shaw, Barbara Chiappetta
7th edition
1260482936, 978-1260482935
