You are trying to determine the optimal dividend policy for your all equity financed company using a PE multiples approach. You consider your company to be a stable growth rate firm. Your return on reinvested earnings is 14% and your required rate of return on equity is 20%. You have two choices: (i) pay a 90% dividend; or (ii) pay a 70% dividend. Which dividend policy maximizes the value of the company’s stock?   Question 1 options:   a)  90% dividend because it leads to a lower PE multiple   b)  90% dividend because it leads to a higher PE multiple   c)  70% dividend because it leads to a lower PE multiple   d)  70% dividend because it leads to a higher PE multiple

You have been hired as a consultant by Capital Pricing Company's CFO, who wants you to help her estimate the cost of capital. You have been provided with the following data: risk free rate = 5%; market risk premium = 9.3%; and beta = 1.12. Based on the CAPM approach, what is the cost of common stock from reinvested earnings?

To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data: D1 = $1.45; P0 = $22.50; and gL = 6.50% (constant). Based on the dividend growth approach, what is the cost of common from reinvested earnings? Group of answer choices 12.94% 11.68% 12.30% 13.59% 11.10%

A financial analyst is attempting to assess the future dividend policy of Environmental Systems by examining its life cycle. She anticipates no payout of earnings in the form of cash dividends during the development stage (I). During the growth stage (II), she anticipates 15 percent of earnings will be distributed as dividends. As the firm progresses to the expansion stage (III), the payout ratio will go up to 33 percent and will eventually reach 57 percent during the maturity stage (IV). a. Assuming earnings per share will be as follows during each of the four stages, indicate the cash dividend per share (if any) during each stage. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places.) Stage I Stage II Stage III Stage IV Stage I Stage II Stage III Stage IV $ 0.30 1.85 2.60 3.80 Aftertax income Dividends b. Assume in Stage IV that an investor owns 335 shares and is in a 15 percent tax…

A financial analyst is attempting to assess the future dividend policy of Environmental Systems by examining its life cycle. She anticipates no payout of earnings in the form of cash dividends during the development stage (I). During the growth stage (II), she anticipates 15 percent of earnings will be distributed as dividends. As the firm progresses to the expansion stage (III), the payout ratio will go up to 31 percent and will eventually reach 55 percent during the maturity stage (IV). Anthe a. Assuming earnings per share will be as follows during each of the four stages, indicate the cash dividend per share (if any) during each stage. (Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places.) Stage I Stage II Stage III Stage IV Stage I Stage II Stage III Stage IV $ 0.35 1.60 2.70 3.60 Aftertax income Dividends b. Assume in Stage IV that an investor owns 310 shares and is in a 15 percent tax…

Assume that you are a consultant to Broske Inc., and you have been provided with the following data: the next expected dividend is $0.67; the current market price is $42.50 and the constant growth rate for the dividends is 8.00% Based on the information given what is the cost of equity?

A financial analyst is attempting to assess the future dividend policy of Environmental Systems by examining its life cycle. She anticipates no payout of earnings in the form of cash dividends during the development stage (I). During the growth stage (II), she anticipates 14 percent of earnings will be distributed as dividends. As the firm progresses to the expansion stage (III), the payout ratio will go up to 40 percent and will eventually reach 53 percent during the maturity stage (IV). a. Assuming earnings per share will be as follows during each of the four stages, indicate the cash dividend per share (if any) during each stage. Note: Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places. Stage I Stage II Stage III Stage IV Stage I Stage II Stage III Stage IV $ 0.25 1.65 2.40 3.90 Aftertax income Dividends b. Assume in Stage IV that an investor owns 325 shares and is in a 15 percent tax…

A financial analyst is attempting to assess the future dividend policy of Environmental Systems by examining its life cycle. She anticipates no payout of earnings in the form of cash dividends during the development stage (I). During the growth stage (II), she anticipates 13 percent of earnings will be distributed as dividends. As the firm progresses to the expansion stage (III), the payout ratio will go up to 37 percent and will eventually reach 59 percent during the maturity stage (IV).   a. Assuming earnings per share will be as follows during each of the four stages, indicate the cash dividend per share (if any) during each stage. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places.)       Stage I $ 0.40 Stage II   1.80 Stage III   2.70 Stage IV   3.30         b. Assume in Stage IV that an investor owns 325 shares and is in a 15 percent tax bracket. What will be the…

As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. You have been provided with the following data: D0 = $0.80; P0 = $22.50; and gL = 8.00% (constant). Based on the dividend growth model, what is the cost of common from reinvested earnings? 10.69% 11.25% 11.84% 12.43% 13.05%

To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data: Do = $1.45; Po = $22.50; and g = 6.50% (constant). Based on the dividend growth approach, what is the cost of common from reinvested earnings? 11.68% 12,30% 12.56% 12.94% 13.36% O O o O o O