XYZ Corp has a dividend payout ratio of 35% and retention ratio of 65% its return...

 

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XYZ Corp has a dividend payout ratio of 35% and retention ratio of 65% its return or equity is 8% and cost of equity capital is 10%. It expects the payout ratio to remain stable. The EPS last year was $12. (a) Calculate the target price of the stock. (b) if the current stock price is $85 what is your investment recommendation? XYZ Corp has a dividend payout ratio of 35% and retention ratio of 65% its return or equity is 8% and cost of equity capital is 10%. It expects the payout ratio to remain stable. The EPS last year was $12. (a) Calculate the target price of the stock. (b) if the current stock price is $85 what is your investment recommendation?

Answer rating: 100% (QA)

a The Dividend Discount Model DDM which is based on the presumption that a stocks value is equal to ... View the full answer