Compute Ke and Kn under the following circumstances: (a) D1 = $3.20, P0 = $62, g

Question

Compute Ke and Kn under the following circumstances:

(a) D1 = $3.20, P0 = $62, g = 5%, F = $2.00. (Round your intermediate and final answers to 2 decimal places.)

Ke%? Kn%?

(b) D1 = $0.10, P0 = $22, g = 5%, F = $2.00. (Round your intermediate and final answers to 2 decimal places.

Ke%? Kn%?

(c) E1 (earnings at the end of period one) = $3, payout ratio equals 20 percent, P0 = $26, g = 2.0%, F = $2.00. (Round your intermediate and final answers to 2 decimal places.

Ke%? Kn%?

(d) D0 (dividend at the beginning of the first period) = $2, growth rate for dividends and earnings (g) = 3%, P0 = $52, F = $2. (Round your intermediate and final answers to 2 decimal places.

Ke%? Kn%?

Explanation / Answer

a) Ke = 3.20/62 +0.05 = 10.16%

Kn = 3.20/62-2 +0.05 = 10.33%

b)Ke = 0.10/22 +0.05 = 5.45%

Kn = 0.10/22-2 +0.05 = 5.5%

c) D1= 20% * 3 = 0.6

Ke = 0.6/26 +0.02 = 4.31%

Kn = 0.6/26-2 +0.02 = 4.5%

d)D1= 2 * 1.03 = 2.06

Ke = 2.06/52 +0.03 = 6.96%

Kn = 2.06/52-2 +0.03 = 7.12%

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