XYZ Inc. pays $3 current dividend out of its net income of $5. XYZ Inc. has...
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XYZ Inc. pays $3 current dividend out of its net income of $5. XYZ Inc. has return on investment of 15%, and a beta of its stock is 1.25. Its dividends are assumed to grow at a constant rate indefinitely. Assume market return of 12.50% and risk-free rate of 3.90%. (1) What is the retention ratio? (2) Find the growth rate of dividends. (3) Find the require rate of return of its stock. (4) Use the constant growth rate model to find the value of the stock. XYZ Inc. pays $3 current dividend out of its net income of $5. XYZ Inc. has return on investment of 15%, and a beta of its stock is 1.25. Its dividends are assumed to grow at a constant rate indefinitely. Assume market return of 12.50% and risk-free rate of 3.90%. (1) What is the retention ratio? (2) Find the growth rate of dividends. (3) Find the require rate of return of its stock. (4) Use the constant growth rate model to find the value of the stock.
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Answer rating: 100% (QA)
To calculate the values requested we can use the following formulas 1 Retention Ratio Net Income Div... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324272055
10th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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