At the end of 2014 the value of the S&P 500 Index divided by the estimated 2014
Question:
At the end of 2014 the value of the S&P 500 Index divided by the estimated 2014 earnings for S&P 500 firms (the S&P 500 P/E multiple) was 18.66. Assume that the long term Treasury bond yield was 3.72 percent, the market risk premium was 5.17 percent, and firms in the S&P 500 were expected to pay out an average of 37.6 percent of their earnings as dividends in the future. At what rate were dividends paid by S&P 500 firms expected to grow in the future?
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The equation of Priceearnings multiple based on constantgrowth model can be used to answer this ques...View the full answer
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