Question

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 price for dividend 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 dividend payout ratio constant?



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  • CreatedFebruary 25, 2015
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