Brutus Co. expects an EPS of $15 per share next period. Currently, their blowback ratio is 0.5. However, the company has the opportunity to finance a new project that will earn an ROE of 11% by cutting its dividend to $5.00 per share. If the Brutus Co's expected stock return is 15%, should they cut dividends to make the new investment?

Answer rating: 100% (QA)

Lets start by calculating the current dividend per share using the blowback rat... View the full answer