It is January 2023 and you are the CFO of MetrixSystems Corp. The firm only pays dividends. The firm is expecting earnings per share (EPS) of$10 at the end of this year. If the firm does not reinvest any of its earnings it will expect to achieve the same EPS of $10 each year in perpetuity.You are considering changing the dividend policy of the firm. Specifically, you want the firm to target a payout rate of 20% each year. The firm'sreturn on new investment is 12.5% and its cost of equity capital (r) is 12%. Calculate the share price under the proposed payout policy. Selectthe best one.$93.75-$2,250$550$83.33O $100

Expected EPS= $10Payout ratio= 20%Return on new investment(ROI) = 12.5%Cost of equity=12%

Answered: It is January 2023 and you are the CFO…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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