Respuesta :
The firm's plowback ratio is 40% are:
Growth rate=ROE*Plowback ratio
= (0.14*0.4) =5.6%
dividend payout ratio=1-Plowback ratio
= (1-0.4) =60%
Hence expected dividend=(60%*EPS)
= (0.6*7) =$4.2
Current price=D1/(Market Capitalization-Growth rate)
=4.2/(0.08-0.056) =$175
PE=Market price/EPS
= (175/7)
=25
The plowback ratio is calculated via way of means of subtracting the quotient of the once a year dividends consistent with percentage and income consistent with percentage (EPS) from 1. On the alternative hand, it may be calculated via way of means of figuring out the leftover budget upon calculating the dividend payout ratio.
The Plowback Ratio is the proportion of a company's income retained and reinvested into operations in place of being paid out as dividends to shareholders. The retention ratio refers to the proportion of internet earnings this is retained to develop the business, as opposed to being paid out as dividends. It is the alternative of the payout ratio, which measures the proportion of income paid out to shareholders as dividends. The retention ratio is likewise referred to as the plowback ratio.
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