Why might a firm begin paying stock dividends in the growth stage?
Answer to relevant QuestionsIf the investor does not correctly identify the crossover point between growth and expansion, what might happen to the price of the stock? What two factors are probably most important in influencing the P/E ratio for an individual stock? Suggest a number of other factors as well. What does the equity risk premium (ERP) represent? Mr. Phillips of Southwest Investment Bankers is evaluating the P/E ratio of Madison Electronics Conveyors (MEC). The firm’s P/E is currently 17. With earning per share of $2, the stock price is $34. The average P/E ratio ...Assume the same facts as in problem 2, but with an ERP of 9 percent. What is the new value for Ke? What does this tell you about investors’ feelings toward risk based on the new ERP?
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