No-Growth Industries pays out all of its earnings as dividends. It will pay its

Question

No-Growth Industries pays out all of its earnings as dividends. It will pay its next $2 per share dividend in a year. The discount rate is 10%.

What is the price-earnings ratio of the company? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

What would the P/E ratio be if the discount rate were 4%? (Round your answer to 2 decimal places.)

What is the price-earnings ratio of the company? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Explanation / Answer

Dividend per share $ 2.00 Discount rate 10.00% Discount rate (b) 4.00% Stock price (P0) = $20.00 Price-earnings ratio = $10.00 Stock price (P0) = $50.00 Price-earnings ratio = $25.00

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