XMZ stock has a price of $10 per share. Earnings per share are expected at $2 and the reinvestment rate is 50%. Dividends are set at 50% of earnings. The investments of XMZ have a 20% rate of return. These statistics are expected to last indefinitely. What is the rate of return investors require on XMZ according to the Gordon Formula we learned in class? What would happen to the price of XMZ stock if instead all earnings were paid out as dividends and reinvestments were set to zero? What would happen to the price of XMZ stock if instead the dividend share of earnings was 10% and the reinvestment rate was set to 90%

Answer rating: 100% (QA)

To calculate the rate of return investors require on XMZ according to the Gordon Formula we can use ... View the full answer