A mining company, with a stable growth of 5%, has net income of $50 million...
80.2K
Verified Solution
Link Copied!
Question
Finance
A mining company, with a stable growth of 5%, has net income of $50 million and market value of equity of $250 million. A decrease in the risk-free rate causes the cost of equity to decrease by 2%. Because of its reinvestment policy, the firm is now forced to decrease its dividend payout ratio by 2%. What will happen to its price-to-earnings (P/E) ratio? The price-to-earnings ratio will decrease O The price-to-earnings ratio will increase The price-to-earnings ratio will remain unchanged
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
