Solution-Constant growth rate assumption

Constant growth rate assumption

Reference no: EM13556002

Palmetto Steel, Inc. (PSI) maintains a dividend payout ratio of 80 percent because of its limited opportunities for expansion. Its return on equity is 15 percent. The required rate of return on PSI equity is 12 percent, and its long-term growth rate is 3 percent. Compute the justified P/B based on forecasted fundamentals, consistent with the residual income model and a constant growth rate assumption.

Reference no: EM13556002

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Constant growth rate assumption

Reference no: EM13556002

Reference no: EM13556002

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