Exhibit 12.9
Use the Information Below for the Following Problem(S)
The aggregate market currently has a retention ratio of 60 percent, a required rate of return of 12 percent, and an expected growth rate for dividends of 4 percent.
-Refer to Exhibit 12.9.What is the current earnings multiplier?
A) 2.5
B) 5.0
C) 7.5
D) 10.0
E) 12.5

Question

Quizplus · Accepted Answer

payout ratio = 1 - retention ratio = 1 - .60 = .40
P/E = payout ratio/(k - g)= 0.40/(0.12 - 0.04)= 0.40/0.08 = 5.0

Exhibit 12.9 Use the Information Below for the Following Problem(S)