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What will happen to its price-to-earnings ratio

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Problem - A mining company, with a stable growth of 5%, has net income of $50 million and market value of equity of $250 million. A decrease in the risk-free rate causes the cost of equity to decrease by 2%. Because of its reinvestment policy, the firm is now forced to decrease its dividend payout ratio by 2%. What will happen to its price-to-earnings (P/E) ratio?

Reference no: EM133005746

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