Reedsburg Associates is currently paying a dividend of $0.40 per share on earnings of $4 per share.

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Reedsburg Associates is currently paying a dividend of $0.40 per share on earnings of $4 per share. Its stock is selling for $200 per share. Stocks of similar risk are priced to return 15%. What kind of return on equity could explain investors' willingness to pay a price equal to 50 times earnings on this stock?
Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Fundamentals of Investments

ISBN: 978-0132926171

3rd edition

Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey

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