Analyse the effect of the change in retention ratio

Reference no: EM131968786

Question: DOFAM Co. dividends per share are expected to grow at 4% rate per year. Analyist expect a dividend of $2 at the end of this year. DOFAM'S stock trades for $20 per share, and the retention ratio has been 50% for quite a while.

(1) Analyse the effect of the change in retention ratio (both an increase and a decrease) on P-E ratio.

(ii) Provide some intuition s for you findings

Reference no: EM131968786

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