Question

The Sharpe Co. just paid a dividend of $1.50 per share of stock. Its target payout ratio is 40 percent. The company expects to have an EPS of $4.15 one year from now.
a. If the adjustment rate is 0.3 as defined in the Lintner model, what is the dividend one year from now?
b. If the adjustment rate is 0.6 instead, what is the dividend one year from now?
c. Which adjustment rate is more conservative? Why?


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  • CreatedJune 17, 2015
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