If the earnings per share of the firm is OMR 10 and the market price is OMR 100 and the growth rate is earning of the firm is 5 %. Calculate the cost of equity share capital. a. 12.5% b. 10% c. None of these
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If the earnings per share of the firm is OMR 10 and the market price is OMR 100 and the growth rate is earning of the firm is 5 %. Calculate the
12.5%
10%
None of these
15%
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- The Cost of Equity and Flotation Costs Messman Manufacturing will issue common stock to the public for $30. The expected dividend and the growth in dividends are $3.00 per share and 5%, respectively. If the flotation cost is 10% of the issue’s gross proceeds, what is the cost of external equity, re?Estimating Cost of Equity Capital Assume that a company’s market beta equals 0.8, the risk-free rate is 5%, and the market return equals 8%. Compute the company’s cost of equity capital. Round answer to one decimal place (ex: 0.0245 = 2.5%) Answer%If the earnings per share of the firm is OMR 6.4 and the market price is OMR 80 and the growth rate of the firm is 5 %. Calculate Ke? a. None of these b. 10% c. 12% d. 13%
- Determining PB Ratio for Companies with Different Returns and Growth Assume that the present value of expected ROPI follows a perpetuity with growth g (Value = Amount/ [r - g]). Determine the theoretically correct PB ratio for each of the following companies A and B. Note: NOPAT = NOA » RNOA. Company Net Operating Assets Equity RNOA ROE Weighted Avg. Cost of Capital Growth Rate in ROPI $100 $100 19% 19% 10% 2% $100 $100 12% 12% 10% 4% A B Round answers to two decimal places. PB Ratio Company A Company BFor Company ABC, if stock price P0 = $30; dividend paid at the end of period 1 D1 = $3.00; growth rate g = 5%; What’s the required rate of return for equity holder rs = ? If the flotation cost F = 10%; What’s the required rate of return for equity holder rs = ?You have the following data: D1 = $1.80; P0 = $36.00; and g = 3.00% (constant). What is the cost of equity from retained earnings based on dividend growth approach? a. 8.00% b. 8.50% C . 5.00% d. 7.70%
- If the earnings per share is Rs 4, dividend pay-out ratio is 40 percent, cost of equity capital is 20 percent and growth rate in the rate of return on investment is 15 percent, then the value of the stock according to the Gordon’s dividend capitalization model is a. Rs 16 b. Rs 24 c. Rs 32 d. Rs 40The following information is available in respect of a firm: Capitalization Rate : 10% Earnings per Share : Rs. 50 Assume rate of return on investments : ja. 12% b. 8% c. 10% Show the effect of dividend policy on market price of shares applying Walter's formula when dividend pay-out ratio is : a. 0% b. 20% c. 40% d. 80% e. 100%What will be the price of a share in year 4, given dividend just paid (Do) as $3, required rate of return as 20% and constant growth in dividend as 15% A. $170.78 B. $120.68 O C. $162.64 • D. $271.72
- The market price of an equity share with face value of Rs 10 is Rs 35, with ROI of 24% and cost of capital of 18%, what will be the Dividend payout ratio?(Use Walter model) a. 10% b. 25% c. 0% d. Cannot be determinedA firm has a current price of Rs. 160 a share, an expected growth rate of 11 percent and expected dividend per share (D1) of Rs. 2. Required rate of return is O a. 12.25% O b. -25% O c. 125% Od. -1.25%Suppose firm A has just earned BDT 5 per share out of which it retained BDT 3 and paid out the remaining balance as dividend. The required rate of return is 10% and the return on equity is 6%. What is firm A’s justified P/E?