Questions 16-26 are based on the following information Stock A has an earnings o

Question

Questions 16-26 are based on the following information Stock A has an earnings of $5 per share at year 1 . The interest rate is 20%, and the return on equity is 25%. 16. If there is no plow-back, how much is the amount of the earnings kept in the firm for each share of the stock at year one? A) $5 B) $3 C) $4 D) $2 E) none of the above 17. If there is no plow-back, what is the earnings per share at year 0 (EPSO)? A) $5 B) $3 C) $4 D) $2 E) none of the above ug 18. If there is no plow-back, what is the dividend per share at year 2 (DIV2)? A) $5 B) $4 C) $3

Explanation / Answer

16)

If there is no plow back, all earnings will be paid out as dividends. So $0 will be kept in the firm.

Hence, correct option is (E) none of the above.

17)

Since no plow back, no growth rate will be there. So EPS 0 = EPS 1.

Hence, correct option is (A) $5.

18)

Since no plow back, no growth rate will be there. All earnings will be paid as dividends. So EPS 1 = EPS 2 = DIV 2.

Hence, correct option is (A) $5.

19)

Growth rate changes stock prices. Stock price do not affect if all earnings were paid out as dividends.

Hence, correct option is (B) $25 ($5/20%).

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.