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.If the payout ratio changes to 50 percent,but there are no other changes,what will be the new P/E?
A) 3.25
B) 4.16
C) 5.75
D) 6.25
E) 7.67

Question

Quizplus · Accepted Answer

P/E = payout ratio/(k - g)= 0.50/(0.12 - 0.04)= 0.50/0.08 = 6.25

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