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Eastern Electric currently pays a dividend of about $164 per share and sells for $27 a share a If investors believe the growth rate of dividends is 3% per year what rate of return do they expect

Eastern Electric currently pays a dividend of about $1.64 per share and sells for $27 a share. a. If investors believe the growth rate of dividends is 3% per year, what rate of return do they expect to earn on the stock? b. If investors’ required rate of return is 10%, what must be the growth rate they expect of the firm? c. If the sustainable growth rate is 5% and the plowback ratio is .4, what must be the rate of return earned by the firm on its new investments? Dividend per share.................................$1.64 Stock price.................................................$27.00 Growth rate of dividends (a) ....................3.00% Required rate of return (b) ........................10.00% Sustainable growth rate...............................5.00% Plowback ratio............................................ 0.40

 

May 15 2020 View more View Less

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