Question

Enterprise Corp typically pays 80% of its net income in dividends. A. Do you believe Enterprise...

Enterprise Corp typically pays 80% of its net income in dividends. A. Do you believe Enterprise has [many] or [few] good investment opportunities? B. Do you expect its net income to increase at a [fast] or [slow] rate?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

A. Do you believe Enterprise has [many] or [few] good investment opportunities?

As the firm is retaining only 20% of its earnings it should be that it does not have many good investment proposals. If it had many good investment proposals, it would be retaining more than 20% to fund the investments required.

However, the firm may be having a few small investment proposals for which it is retaining the 20%. Or it may be that the 20% is being retained for regular capital investments to maintain the productive capacity.

B. As the firm is retaining only 20% of its earnings, its growth rate would be lower, as growth rate is given by:

Growth rate = ROE*retention ratio. The growth in earnings would not be fast.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Enterprise Corp typically pays 80% of its net income in dividends. A. Do you believe Enterprise...
Enterprise Corp typically pays 80% of its net income in dividends. A. Do you believe Enterprise has [many] or [few] good investment opportunities? B. Do you expect its net income to increase at a [fast] or [slow] rate? You expect Sterling Company will pay a dividend of $60 million and repurchase $90 million of its common shares next year (Year 1) with both expected to grow 6% in Year 2 and 7% in Year 3. If you expect the company...
4. Enterprise Corp typically pays 80% of its net income in dividends. A. Do you believe...
4. Enterprise Corp typically pays 80% of its net income in dividends. A. Do you believe Enterprise has [many] or [few] good investment opportunities? B. Do you expect its net income to increase at a [fast] or [slow] rate? 5. You expect Sterling Company will pay a dividend of $60 million and repurchase $90 million of its common shares next year (Year 1) with both expected to grow 6% in Year 2 and 7% in Year 3. If you expect...
You are considering buying a stock that you believe pays $5 in dividends a year forever....
You are considering buying a stock that you believe pays $5 in dividends a year forever. a. Suppose you believe that the beta of the stock is 0.4. How much is the stock worth if the risk free rate is 4% and the expected rate of return on the market portfolio is 11%? b. By how much will you overvalue the stock if its beta is actually 0.6?
You expect Tiger Corp will pay $50 million in dividends and repurchase $80 million of its...
You expect Tiger Corp will pay $50 million in dividends and repurchase $80 million of its stock over the next 12 months (Year 1). You expect dividends and share repurchases to grow 8% in Year 2 and 7% in Year 3. You also expect Tiger could be bought by a larger competitor at the end of Year 3 for $3.5 billion. If all payments are made at year end, and you have calculated the cost of equity to be 9.0%,...
1. Dividends come out of a company’s net income. Dividends are reported on a per share...
1. Dividends come out of a company’s net income. Dividends are reported on a per share basis. Earnings Per Share (EPS) is a company’s net income per share of stock. The payout ratio is the percentage of earnings that a company pays out as dividends. So, to calculate payout ratio, you dividend by the EPS. a. If a company pays a dividend of $1.2 and its EPS is $3, what is the payout ratio? A company will often try to...
Seaside Corp pays out 35% of its earnings (EAC) as common stock dividends. The firm has...
Seaside Corp pays out 35% of its earnings (EAC) as common stock dividends. The firm has $1.2 M in net profit after taxes and pays $450,000 in preferred dividends. The firm has 400,000 shares of common stock outstanding. The market price per share is $24.54. What is the dividend yield? Please show all work!
Pro Build Inc. has had a net income of $16 million in its most recent year....
Pro Build Inc. has had a net income of $16 million in its most recent year. Net income is expected to grow by 3% per year. The firm always pays out 80% of net income as dividends and has 7 million shares of common stock outstanding. The required return is 9%.   Attempt 1/3 for 8 pts. Part 1 What is the current stock price? please the answer fast
1. You expect Tiger Corp will pay $50 million in dividends and repurchase $80 million of...
1. You expect Tiger Corp will pay $50 million in dividends and repurchase $80 million of its stock over the next 12 months (Year 1). You expect dividends and share repurchases to grow 8% in Year 2 and 7% in Year 3. You also expect Tiger could be bought by a larger competitor at the end of Year 3 for $3.5 billion. If all payments are made at year end, and you have calculated the cost of equity to be...
Q1: Parabola Corp just paid out a dividend of $3.85/share to its shareholders today and promises...
Q1: Parabola Corp just paid out a dividend of $3.85/share to its shareholders today and promises to increase its dividend by 20% next year and then reduce the dividend growth rate by 5 percentage points per year until it reaches the industry average of 5% dividend growth in perpetuity. If shareholders expect a 13% return, what is the price of the stock today? Q2: Hyperbola Corp currently has no growth opportunities and pays out all of its earnings as dividends...
ABC Corp. has an ROE of 8% and reinvests 40% of its net income. ABC has...
ABC Corp. has an ROE of 8% and reinvests 40% of its net income. ABC has just paid an annual dividend of $0.25. ABC stock has a beta of 1.1. The risk-free rate is 2.8% and the expected return on the market portfolio is 7%. What is the appropriate discount rate? What is the expected growth rate of dividends? What is the intrinsic value (fair price) of ABC stock?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT