These 2 questions are together. QUESTION 1 Your goal is to increase your...
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Accounting
These 2 questions are together.
QUESTION 1 Your goal is to increase your firm's share price. You will do this by changing the dividend payout rate.The dividend payout rate is initially.80 = 80% of income paid out as dividends. Thus your firm's retention rate is 20 = 20% = 1 - .80. Your firm has net income of $10, an initial share price of $60, and return on new investment of 25 = 25%. You cut the dividend payout rate from.80 to 60. There is no change in the return on new investment. Find the initial dividend and r (before you reduce the dividend payout rate) a. dividend = $10,- 1043 b. Dividend - $8, r -.1833 c. Dividend = $6,- 1518 d. None of these QUESTION 2 Your goal is to increase share price. Your firm has net income of $10. You have changed the dividend payout rate to .60, so that the retention rate becomes.40. You determined the rate of return.r, when answering question 1. What is the new growth rate and the new stock price per share? ag - .30, new share price - $90 b.g = 40, new share price = $200 c.gr.10, new share price - $72 d. none of these
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