Question

No-Growth Industries pays out all of its earnings as dividends. It will pay its next $5...

No-Growth Industries pays out all of its earnings as dividends. It will pay its next $5 per share dividend in a year. The discount rate is 12%.

a. what is the price earnings ratio of the company?

b. what would the p/e ratio be if the discount rate were 10%?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
It will pay all its earning as dividend.It means earning and dividend is same.
a. Price earning ratio = Current Price/Earning per share
= $   41.67 / $    5.00
=        8.33
Working:
Price = Dividend of next year/Discount rate
= $    5.00 / 12%
= $   41.67
b. Price earning ratio = Current Price/Earning per share
= $   50.00 / $    5.00
=      10.00
Working:
Price = Dividend of next year/Discount rate
= $    5.00 / 10%
= $   50.00
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
No-Growth Industries pays out all of its earnings as dividends. It will pay its next $3...
No-Growth Industries pays out all of its earnings as dividends. It will pay its next $3 per share dividend in a year. The discount rate is 12%. a. What is the price-earnings ratio of the company? (Do not round intermediate calculations. Round your answer to 2 decimal places.) P/E ratio ______ b. What would the P/E ratio be if the discount rate were 10%? (Round your answer to 2 decimal places.) P/E ratio _______
Laurel Enterprises expects earnings next year of $4 per share. The company will pay out all...
Laurel Enterprises expects earnings next year of $4 per share. The company will pay out all of its earnings to investors. Its expected return on new investment (i.e., ROE) is 12%. The required rate of return is 10%. What is the intrinsic value of the stock today? Laurel Enterprises expects earnings next year of $4 per share. The company will retain $2.4 of its earnings to reinvest in new projects that have an expected return of 12% per year (i.e.,...
Dividends discount model: The MBS Corporation’s dividends per share are expected to grow indefinitely by 5%...
Dividends discount model: The MBS Corporation’s dividends per share are expected to grow indefinitely by 5% per year. DDa.       If this year-end dividend is $8 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM (Dividends Discounting Model)? DDb.      If the expected earnings per share are 12$, what is the implied value of the ROE on future investment opportunities? DDc.       How much is the market paying per share for growth opportunities (i.e., for...
ABC Inc., will pay no dividends over the next 13 years because the firm needs to...
ABC Inc., will pay no dividends over the next 13 years because the firm needs to retain its earnings for growth purposes. The company will pay an $4 per share dividend in 14 years and will increase the dividend by 4 percent per year thereafter. If the required return on this stock is 9 percent, what is the current (t=0) share price? ABC Inc. just paid a dividend of $1.75 per share. The company will increase its dividend by 28...
A company plans to pay no dividends in the next 3 years because it needs earnings...
A company plans to pay no dividends in the next 3 years because it needs earnings to finance new investment projects. The firm will pay a $3.00 per share dividend in year 4 and will increase the dividend by 20% per year for the next 3 years (i.e., year 5 to year 7). After that the company will maintain a constant dividend growth rate of 6 percent per year forever. The required return on the stock is 16% per year....
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...
9. a company pays annual dividends as a percentage of annual earnings per share. Last year...
9. a company pays annual dividends as a percentage of annual earnings per share. Last year the companys stock earned $8.00 per share and the dividend payout ratio was 25%.The company just announced expectations that that earnings are to increase by 48 cents per share in the coming year and that they will keep the payout ratio dividends the same as last year at 25% per share. The company also said that future dividends will grow at the same rate...
Company Z-prime’s earnings and dividends per share are expected to grow by 4% a year. Its...
Company Z-prime’s earnings and dividends per share are expected to grow by 4% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $9, the market capitalization rate is 9% and next year’s EPS is $14. What is Z-prime’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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!
Surf & Turf Hotels is a mature business, although it pays no cash dividends. Next year’s...
Surf & Turf Hotels is a mature business, although it pays no cash dividends. Next year’s earnings are forecasted at $70 million. There are 10 million outstanding shares. The company has traditionally paid out 50% of earnings by repurchases and reinvested the remaining earnings. With reinvestment, the company has generated steady growth averaging 5% per year. Assume the cost of equity is 16%. a. Calculate Surf & Turf ’s current stock price, using the constant-growth DCF model. (Hint: Take the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT