No-Growth Industries pays out all of its earnings as dividends. It will pay its next $4 per

Question:

No-Growth Industries pays out all of its earnings as dividends. It will pay its next $4 per share

dividend in a year. The discount rate is 12%.

a. What is the price-earnings ratio of the company?

b. What would the P/E ratio be if the discount rate were 10%?

Dividend per share....... $4.00

Discount rate....... 12.00%

Discount rate (b) ....... 10.00%

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...