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Plowback Ratio

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Stormy Weather has no attractive investment opportunities. Its return on investment (ROE) is equal to the discount rate that is 10 percent. Its expected earnings this year are $3 per share. Find the stock price for a plowback ratio (retention ratio) of 40%.

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Related BrainMass Solutions

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    (Round your answers to 2 decimal places) When plowback ratio = 17%, The growth rate of the company is g=ROE* plowback ratio = 24%*17% = 4.08% Dividend for next period is D1 = E*(1 - plowback ratio)*(1+g) = 3*(1-0.28)*(1+4.08%) = 2.25 Then

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    The equation is: (ROA x b)/(1-ROA x b) Where b is the plowback ratio. (Plowback = Addition to retained earnings/net income) Therefore, Plowback Ratio is nothing but (1-dividend payout ratio) = 1 - 0.4 = 0.6 or 60%.

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    Find the price and P/E ratio of the firm. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Find the price and P/E ratio of the firm, if the plowback ratio is reduced to .10?

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    growth rate of dividends/earnings=g= plowback ratio x ROE= 50% x 16%= 8% dividend payout ratio = 100% - plowback ratio= 100%-50%= 50% next years earnings= $2.00 per share therefore, next years dividends=D1=50% * $2

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    121259 External financing - Plowback ratio If a firm uses external financing as a plug item, has a new capital budget of $3 million, a net income of $4 million, and a plowback ratio of 35%, how much should be raised in external funds?

  • Finance - YTM, WACC, Plowback and more

    Options: - Moving the plowback ratio to 100% will add shareholder value - Moving the plowback ratio to 100% will erode shareholder value - Keeping the plowback ratio at 0% will erode shareholder value - Not enough information to answer this question

  • Sustainable Growth Rate

    IGR = (ROA x b) / [1 - (ROA x b)], where b = plowback ratio.

  • Finance

    90090 ROA, ROE, and Plowback Ratio Marquez Inc. has announced $50,000 in net income after paying taxes of $26,000 and interest of $20,000. They intend to pay $17,000 of net income as dividends.

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