he following information is collected from the current annual report of XYZ Ltd :  Earning of firm Rs. 9, 00,000  Number of equity shares 1, 50,000  Return on Equity 22.5%  Cost of equity 15% What should be the dividend payout ratio so as to keep the share price at Rs. 48 by using Walter Model? Also, determine the optimum dividend payout ratio and the market price of share at the optimum dividend payout ratio. What will the maximum and minimum share price under this model?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 1P
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The following information is collected from the current annual report of XYZ Ltd
:
 Earning of firm Rs. 9, 00,000
 Number of equity shares 1, 50,000
 Return on Equity 22.5%
 Cost of equity 15%
What should be the dividend payout ratio so as to keep the share price at Rs. 48 by
using Walter Model? Also, determine the optimum dividend payout ratio and the
market price of share at the optimum dividend payout ratio. What will the
maximum and minimum share price under this model?

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