Question

Compute *K _{e}* and

**a.** *D*_{1} = $6.60,
*P*_{0} = $76, *g* = 6%, *F* = $4.00.
**(Do not round intermediate calculations. Round your answers
to 2 decimal places.)**

*K _{n}*

**b.** *D*_{1} = $.35,
*P*_{0} = $36, *g* = 10%, *F* = $1.50.
**(Do not round intermediate calculations. Round your answers
to 2 decimal places.)
**

*K _{e}*

*K _{n}*

**c.** *E*_{1} (earnings at the end of
period one) = $10, payout ratio equals 25 percent,
*P*_{0} = $40, *g* = 9.0%, *F* =
$2.50. **(Do not round intermediate calculations. Round your
answers to 2 decimal places.)
**

*K _{e}*

*K _{n}*

**d.** *D*_{0} (dividend at the
beginning of the first period) = $9, growth rate for dividends and
earnings (*g*) = 2%, *P*_{0} = $66,
*F* = $6. **(Do not round intermediate calculations.
Round your answers to 2 decimal places.)
**

*K _{e}*

*K _{n}*

Answer #1

a. Ke = D1/ pO + g

= $6.6/ $76 + 0.06

=14.68%

Kn = D1/(po - f) + g

= $6.6/ (76-4 ) + 0.06

=6.6/ 72 + 0.06

=15.17%

b. D1/Po + g

Ke =0.35/ 36 + 0.10

Ke = 10.97%

Now, Kn = D1/(Po - f) + g

=0.35/(36 - 1.5) + 0.06

=7.01% (rounded off to two decimal places)

c. E1 =$10,

dividend payout = 25%

D1 = $2.5

Ke = D1/PO + G

=$2.5/$40 + 0.09

=15.25%

Kn = D1/(Po - f) + g

$2.5/(40-2.5) + 0.09

=15.67% (rounded off to two decimal places)

D. Ke = D1/po + g

= 9*1.02/66 + 0.02

=15.91% (rounded off to two decimal places)

Kn = D1/(Po - f) + g

= $9.18/ (66-6) + 0.02

=17.3%

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