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Category > Accounting Posted 18 Jun 2017 My Price 3.00

Measuring growth Common stock valuation

1. (Measuring growth) The Cammack Corporation wants to achieve a steady 7 percent growth rate. If it can achieve a 12 percent return on equity, what percentage of earnings must Cammack retain for investment purposes?

 

2. (Common stock valuation) The dividend policy of Scorpio Inc. has been recently changed to payout 40 percent of its earnings to shareholders. The company has just paid dividends of $3 per share.

a. Calculate the growth rate of dividends if the return on equity is 12 percent.

Answers

Alpha Geek
(8)
Status NEW Posted 18 Jun 2017 10:06 AM My Price 3.00

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file 1497782686-Answer.docx preview (22 words )
A-----------nsw-----------er ----------- 1.----------- as-----------sum-----------e b----------- as----------- re-----------ten-----------tio-----------n r-----------ati-----------o G-----------row-----------th=-----------(RO-----------E*b-----------)/(-----------1-(-----------ROE-----------*b)----------- 7%-----------=(1-----------2%*-----------b)/-----------(1------------(12-----------%*b-----------) 7-----------%*(-----------1-1-----------2%*-----------b)=-----------12%-----------*b -----------7%------------0.8-----------4%=-----------12%-----------*b -----------12.-----------84%-----------*b=-----------7% -----------b=7-----------%/1-----------2.8-----------4%=-----------0.5-----------5 o-----------r 5-----------4.5-----------2% -----------of -----------ear-----------nin-----------gs -----------sho-----------uld----------- be----------- re-----------tai-----------ned----------- -----------2. -----------gro-----------wth----------- ra-----------te=-----------(12-----------%*6-----------0%)-----------/(1------------(1-----------2%*-----------60%-----------))=-----------7 -----------
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