Consider the following data: Year 1 Year 2 Year 3 Year 4 Book value of Equity...

 

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Consider the following data: Year 1 Year 2 Year 3 Year 4 Book value of Equity 25 ROE 22% 22% 30% 30% Payout 65% 65% 60% 60% Net Income Dividends Retained Earnings g a) Complete the table. b) Check that in period 2 and period 4, the dividends grow according to the formula: g = ROE (1 Payout) and explain. c) Determine the value of equity (E), taking into account that the dividend growth rate after the 4th year is the same as in the 4th year, and that the required return on equity is 20%. Consider the following data: Year 1 Year 2 Year 3 Year 4 Book value of Equity 25 ROE 22% 22% 30% 30% Payout 65% 65% 60% 60% Net Income Dividends Retained Earnings g a) Complete the table. b) Check that in period 2 and period 4, the dividends grow according to the formula: g = ROE (1 Payout) and explain. c) Determine the value of equity (E), taking into account that the dividend growth rate after the 4th year is the same as in the 4th year, and that the required return on equity is 20%.

Answer rating: 100% (QA)

a Completing the table Year 1 Year 2 Year 3 Year 4 Book value of Equity 25 22 30 ROE 22 30 Payout 65 ... View the full answer