Apex Financial Ltd is concerned about the impact of errors in its estimates of the future dividend payout ratio for Barnett Steel Corporation Assume that the current dividend is $1, ROE is fixed at 10 percent, and the required rate of return is 15 percent Using Excel, calculate the current stock pr...

No As the dividend payout ratio increases the percentage change in stock prices decrease ...

Apex Financial Ltd. is concerned about the impact of errors in its estimates of the future dividend

Question:

Apex Financial Ltd. is concerned about the impact of errors in its estimates of the future payout ratio for Barnett Steel Corporation. Assume that the current is $1, ROE is fixed at 10 percent, and the required rate of return is 15 percent. Using Excel, calculate the current stock price for payout ratios ranging between 5 percent and 75 percent in 5 percentage point increments. Is the percentage change in the stock price for a 5 percentage point change in payout ratio constant?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...