Our company forecasts to pay an $8.33 dividend next year, which represents 100% of its earnings....
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Our company forecasts to pay an $8.33 dividend next year, which represents 100% of its earnings. This will provide investors with a 15% expected return. Instead, we decide to plow back 40% of the earnings at the firm's current return on equity of 25%. What is the value of the stock before and after the plowback decision? Our company forecasts to pay an $8.33 dividend next year, which represents 100% of its earnings. This will provide investors with a 15% expected return. Instead, we decide to plow back 40% of the earnings at the firm's current return on equity of 25%. What is the value of the stock before and after the plowback decision?
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Answer rating: 100% (QA)
The expected return for an investor is equal to the dividend yield ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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