Question

# Compute Ke and Kn under the following circumstances: a. D1 = \$6.60, P0 = \$76, g...

Compute Ke and Kn under the following circumstances:

a. D1 = \$6.60, P0 = \$76, g = 6%, F = \$4.00. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Ke

Kn

b. D1 = \$.35, P0 = \$36, g = 10%, F = \$1.50. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Ke

Kn

c. E1 (earnings at the end of period one) = \$10, payout ratio equals 25 percent, P0 = \$40, g = 9.0%, F = \$2.50. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Ke

Kn

d. D0 (dividend at the beginning of the first period) = \$9, growth rate for dividends and earnings (g) = 2%, P0 = \$66, F = \$6. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Ke

Kn

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%