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2.( Common stock valuation) assume the following:
a. What is the expected growth rate for dividends? b. What is the price earnings ratio? c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? e. Using the dividend discount model, what would be the stock price if the company increased its retention rate to 60% (holding all else constant)? What would be the P/E ratio (P/E1) if the company increased its retention ratio to 60% (holding all else constant)?(round to three decimal places) e. (ii) Using the dividend discount model, what would be stock price if the company paid out all its earnings in the form of dividends?(round to the nearest cent.) What would be the P/E ratio, (P/E1) and the stock price if the company paid out all it's earning in the form of dividends? Round to three decimal places f. What have you learned about the relationship between the retention ratio and the P/E ratio? Assume that the investor's required rate of return is greater than the dividend growth rate, the higher the retention ratio, other things being the same the lower or higher the value of the common stock and thus the lower or higher the price earnings ratio, P/E. (Select one) Assume that the investor's required rate of return is greater than the dividend growth rate, the higher the retention ratio, other things being the same, the (lower or higher)the value of the common stock and thus the (lower or higher) the price earning ratio P/E.
EMC Company has never paid a dividend. EMC current free cash flow of $400,000 is expected to increase at a constant rate of 5 percent. The weighted average cost of capital is 12%.
By how much will the cost of equity increase if the company expands its operations such that the company beta rises to 1.60? Answer A. 0.88% B. 1.07% C. 1.50% D. 2.10% E. 2.26%
Discuss the advantages and disadvantages of financing capital expenditures through the use of internally generated cash. Cite cases where it is more effective and efficient to fund through internal funds and external funding source.
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Emery Company just paid a dividend of $2.25 per share. The company's stock is currently selling for $60 per share, and the required rate of return on Emery Company stock is 16%. What is the growth rate expected for Emery Company dividends assuming..
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