A firm has current assets that could be sold for their book value of $10 million

Question

A firm has current assets that could be sold for their book value of $10 million. The book value of its fixed assets is $60 million, but they could be sold for $95 million today. The form has total debt at a book value of $40 million, but interest rate increased the value of the debt to a current market value of $50 million. This firm's market-to-book ratio is 1.83 1.50 1.35 1.46 Suppose that in 2012 the expected dividends of the stocks in a board market index equaled $240 million when the discount rate was 8% and the expected growth rate of the dividends equaled 6%, Using the constant growth formula for valuation, if interest rates increase rates increase to 9%, the value of the market will change by_. -10% -20% -25% -33% Gagliardi way Corporation has an expected ROE of 15%. If it pays out 30% of its earning as dividends, its dividend growth rate will be_. 4.5% 10.5% 15% 30%

Explanation / Answer

FIRST TWO PARTS ARE NOT VISIBLE.

3. DIVIDEND GROWTH RATE = RETENTION RATIO * ROE

=(1-0.3)*0.15

=10.5%

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