Question 4 1 pts Hannett Inc. has a stock price of $35.92 and just paid a divide

Question

Question 4 1 pts Hannett Inc. has a stock price of $35.92 and just paid a dividend of $3 per share. The firm maintains a constant dividend payout of 65.5% and has an expected return on equity (ROE) of 7.7%. Based on the constant growth model, Hannett's expected rate (k) of return is closest to Rearrange the DDM solving for k. Your answer should be in % rounded to 2 decimal places. Question 5 1 pts Tanex Inc. has a return on assets (ROA) of 16%, a return on equity (ROE) of 996, and a dividend n the sustainable growth for mula, Tanex's estimated growth is: Your answer should be in % rounded to 2 decimal places.

Explanation / Answer

4) First of all we need to find growth rate

Growth rate = g= ROE*retention ratio

ROE = 7.7%

Retention ratio = 1- payout ratio

=1-0.655

=34.5%

Growth rate = 0.077*0.345 = 2.66%

now, Ke = D1/Po +g

D1 = Do(1+g) = 3(1+0.0266)

=3(1.0266) = 3.0798$

Po = 35.92$

Ke = 3.0798/35.92 + 0.0266

=0.085741 + 0.0266

=0.1123 ie 11.23%

5)

Growth rate = g= ROE*retention ratio

ROE = 9%

Retention ratio = 1- payout ratio

=1-0.32

=68%

Growth rate = 0.09*0.68 = 6.12%

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