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Calculate the growth rate of dividends

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Reference no: EM133123790

The dividend policy of ECRL Berhad has been recently changed to payout 40 percent of its earnings to shareholders. The company has just paid dividends of $3.00 per share.

REQUIRED:

i. Calculate the growth rate of dividends if the return on equity is 12 percent.

ii. Calculate the cost of equity capital if the market price of ECRL Berhad shares is $50.00.

iii. Would you invest in this company if your required rate of return is 18 percent? Why?

Reference no: EM133123790

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