Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
X Ltd. earns Rs. 5 per share is capitalised at a rate of 10% and has a rate of return on investment of 18%. According to Water's Formula - (i) What should be the price per share at 25% dividend payout ratio? (ii) Is this optimum payout ratio?
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Transcribed Image Text:X Ltd. earns Rs. 5 per share is capitalised at a rate of 10% and has a rate of return on investment of 18%. According to Water's Formula - (i) What should be the price per share at 25% dividend payout ratio? (ii) Is this optimum payout ratio?
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Step 1: Formula.
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Step 2: Computation of Dividend per share.
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Step 3: Answer to part a. Computation of price per share.
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Step 4: Answer to part b. Optimum Payout ratio.
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