What is the new pay-out ratio

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A company is expected to grow its dividends as follow Year 1 $0.56

Year 2 $0.62

Year 3 $0.69

Year 4 $0.77

Year 5 $0.85

After year 5, the growth slows to 6% a year. Return on Capital is now 10%, the Debt/ Equity ratio is 20% and interest on company debt is 7%. The beta drops from 0.85 to 0.95. Everything else remains the same.

What is the new pay-out ratio?

What is the Price per share at the end of the 5th year?

What is the current theoretical Price per share?

Reference no: EM132554561

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