Nogro Corporation stock is currently selling for R 10 per share. Earnings per share (EPS) in the coming year are expected to be R2. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinitely.

1.Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth dividend discount model what rate of return do Nogros investors require? 

2.It By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested! 

3. In If Negro were to cut its dividend payout ratio to 25% what would happen to its stock price? What if Negro eliminated the decided Your answer Send me a copy of my responses.

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1 Constant growth rate Reinvestment rate Rate of return Constant growth rate 50 20 Constant growth r... View the full answer