Solution-What must be the rate of return earned by the firm

What must be the rate of return earned by the firm

Assignment Help Managerial Accounting

Reference no: EM13940473

Eastern Electric currently pays a dividend of about $1.64 per share and sells for $27 a share.

a. If investors believe the growth rate of dividends is 3% per year, what rate of return do they expect to earn on the stock?

b. If investors required rate of return is 10%, what must be the growth rate they expect of the firm?

c. If the sustainable growth rate is 5% and the plow back ratio is .4, what must be the rate of
return earned by the firm on its new investments?

Dividend per share.................................$1.64
Stock price.................................................$27.00
Growth rate of dividends (a) ....................3.00%
Required rate of return (b) ........................10.00%
Sustainable growth rate...............................5.00%
Plow back ratio............................................ 0.40

Reference no: EM13940473

Questions Cloud

What legal risks are raised by dr. stevens actions : You are head of risk management for a medical group that is employed by a hospital. You have just learned that Dr. Stevens, an orthopedic surgeon, has sent Christmas gifts for the past three years to every primary care provider who has referred patie..

What offences could ketut, rhonda, trent, and tim be charged : What offences could Ketut, Rhonda, Trent, and Tim be charged with under Victorian and federal drug laws? Explain your response using relevant legislation and case law. Deal with each person in turn.

Return on common stockholders equity : The condensed financial statements of John Cully Company, for the years ended June 30, 2012 and 2011, are presented below.John Cully Company

Discuss how would create and implement such unit in agency : Discuss how you would create and implement such a unit in this agency. Discuss other factors you would need to consider, such as who would lead it, and who would staff the unit? What resources would you give this unit and what authorities and goal..

What must be the rate of return earned by the firm : If the sustainable growth rate is 5% and the plow back ratio is .4, what must be the rate of return earned by the firm on its new investments?

Prints all real solutions to the quadratic equation : Write a Java program that prints all real solutions to the quadratic equation ax^2 + bx + c = 0. Read in a, b, c and use the quadratic formula

Ina machine company flexible budget : The production budgeted for September was 6,000 units. During the month, the company produced 6,200 units. The conversion costs incurred were:

How awareness of worldwide patterns of race and racism : Summarize why Winant believes that "the global racial situation remains volatile and undertheorized" (2006, p. 988). Explain if you agree or disagree with this belief, supporting your position.

Current state of water accounting in australia : Your task is to research the current state of water accounting in Australia. At a minimum you should be able to report on: Who currently has oversight responsibility and authority to direct water accounting in Australia?

User Account

All Pages

What must be the rate of return earned by the firm

Reference no: EM13940473

Reference no: EM13940473

Questions Cloud

Reviews

Write a Review

Managerial Accounting Questions & Answers

Manage budgets and financial plans

Prepare a retained earnings statement

Prepare a master budget for the three-month period

Construct the companys direct labor budget

Evaluate the predetermined overhead rate

Determine the company''s bid

Compute the pool rates for the different activities

Prepare Company financial statements

Prepare an analysis of terracycles

Discuss the ethical issues

Political resources in emerging markets

Management accounting - ehsan electronics company

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT