Ask Question
6 July, 16:53

Joker stock has a sustainable growth rate of 8 percent, ROE of 18 percent, and dividends per share of $3.35. If the P/E ratio is 18.7, what is the value of a share of stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

+2
Answers (1)
  1. 6 July, 19:23
    0
    112.70

    Explanation:

    First, use the formula for sustainable growth rate to find retention rate;

    SGR = ROE * retention rate

    0.08 = 0.18 * retention rate

    retention rate = 0.08/0.18

    retention rate = 0.444 or 44.4%

    This means that dividend payout ratio = 1 - 0.444 = 0.556 or 55.56%

    Earnings per share = $3.35/0.556 = $6.025

    Give P/E ratio of 18.7,

    price per share = 18.7 * 6.025 = $112.70
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Joker stock has a sustainable growth rate of 8 percent, ROE of 18 percent, and dividends per share of $3.35. If the P/E ratio is 18.7, what ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers