USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that the dividend payout ratio will be 75 percent when the rate on long-term government bonds falls to 8 percent. Because investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 15 percent return. The return on equity will be 12 percent.
-Refer to Exhibit 9.2. To what price will the market rise if the earnings expectation is $32.00?
A) $384.00
B) $266.56
C) $213.44
D) $200.00
E) $125.44

Question

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The Answer of USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that the dividend payout ratio will be 75 percent when the rate on long-term government bonds falls to 8 percent. Because investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 15 percent return. The return on equity will be 12 percent.
-Refer to Exhibit 9.2. To what price will the market rise if the earnings expectation is $32.00?
A) $384.00
B) $266.56
C) $213.44
D) $200.00
E) $125.44