Question 17: The common stock of Brook Myers, Inc. is selling for $38.50 a share

Question

Question 17: The common stock of Brook Myers, Inc. is selling for $38.50 a share and pays dividends annually. There are 15,000 shares outstanding. The firm has a target retention ratio of .7 and a tax rate of 35 percent. Dividend income is taxed at 15 percent. The company is paying a $1.06 per share dividend today. After the dividend, you would expect the stock price to be _____ and the price-earnings ratio to be _____.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

a.            $37.60; 10.64

b.            $38.50; 10.64

c.             $37.60; 24.83

d.            $37.60; 10.90

e.            $38.50; 24.83

Explanation / Answer

c.             $37.60; 24.83

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