The behavior of A Company’s payout policy in the future. Introduction: Payout ratio: It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Question

Want to see the full answer?

Answer 1

Question

Chapter 14, Problem 5DQ

Summary Introduction

To explain: The behavior of A Company’s payout policy in the future.

Introduction:

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Whizcom Inc. is expected to pay a dividend of $1 next period. Dividends are expected to grow at 2% per year and the investors require a return of 12%. i) Compute the current stock price for Whizcom Inc.ii) What would be the likely stock price in year 5?iii) What would be per annum rate of return implied by a change in prices from time 0 to time 5?

You want to check if GRBH stock is fairly priced in the markets by using the fundamental analysis. For this purpose, you have gathered the following information: GRBH pays dividends once a year and the next dividend payment is expected to be made in one year. You project the EPS of the first and second year to be $5 and $7 respectively. The company dividend payout ratio is stable at 0.2. At the end of the second year, you assume that the company would become the average company in the industry. The industry average PE ratio is 8. You believe that the appropriate required rate of return on GRBH stock is 10% (CCR per annum). And the current market price of GRBH stock is $45. Find the present value of GRBH stock based on the information above. Is the stock over- or under-priced? Find the alpha ( Expected abnormal rate of return, c ) assuming the mispriced figure would be corrected in a year.

You want to check if GRBH stock is fairly priced in the markets by using the fundamental analysis. For this purpose, you have gathered the following information: GRBH pays dividends once a year and the next dividend payment is expected to be made in one year. You project the EPS of the first and second year to be $5 and $7 respectively. The company dividend payout ratio is stable at 0.2. At the end of the second year, you assume that the company would become the average company in the industry. The industry average PE ratio is 8. You believe that the appropriate required rate of return on GRBH stock is 10% (CCR per annum). And the current market price of GRBH stock is $45. ind the present value of GRBH stock based on the information above. Is the stock over- or under-priced?

Answer 2

Question

Chapter 14, Problem 5DQ

Summary Introduction

To explain: The behavior of A Company’s payout policy in the future.

Introduction:

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 14, Problem 5DQ

Summary Introduction

To explain: The behavior of A Company’s payout policy in the future.

Introduction:

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 14, Problem 5DQ

Summary Introduction

To explain: The behavior of A Company’s payout policy in the future.

Introduction:

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 14, Problem 5DQ

Summary Introduction

To explain: The behavior of A Company’s payout policy in the future.

Introduction:

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Answer 6

Chapter 14, Problem 5DQ

Summary Introduction

To explain: The behavior of A Company’s payout policy in the future.

Introduction:

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Answer 7

Chapter 14, Problem 5DQ

Summary Introduction

To explain: The behavior of A Company’s payout policy in the future.

Introduction:

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Answer 8

Expert Solution & Answer

Answer 9

Expert Solution & Answer

Answer 10

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 11

Ch. 14 - Prob. 1Q Ch. 14 - The cost of retained earnings is less than the...Ch. 14 - Would it ever be rational for a firm to borrow...Ch. 14 - Modigliani and Miller (MM), on the one hand, and...Ch. 14 - How would each of the following changes tend to...Ch. 14 - One position expressed in the financial literature...Ch. 14 - Prob. 7Q Ch. 14 - What is the difference between a stock dividend...Ch. 14 - Most firms like to have their stock selling at a...Ch. 14 - Indicate whether the following statements are true...

The behavior of A Company’s payout policy in the future. Introduction: Payout ratio: It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Solution Summary: The author explains the behavior of A Company's payout policy in the future. Payout ratio defines the proportion of earnings a company share with its shareholders as dividends.

Concept explainers

To explain: The behavior of A Company’s payout policy in the future.

Introduction:

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Want to see the full answer?

Chapter 14 Solutions

The behavior of A Company’s payout policy in the future. Introduction: Payout ratio: It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Solution Summary: The author explains the behavior of A Company's payout policy in the future. Payout ratio defines the proportion of earnings a company share with its shareholders as dividends.

Concept explainers

To explain: The behavior of A Company’s payout policy in the future. Introduction: Payout ratio: It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.

Want to see the full answer?

Chapter 14 Solutions

To explain: The behavior of A Company’s payout policy in the future.

Introduction:

Payout ratio:

It is used to define the proportion of earnings a company share with its shareholders as dividends. In other words it is the fraction of net income to stockholders dividends.