Posted: March 6th, 2014
expected rate of return
A friend comes to you with the following information on company X. He tells you that the company has price to earnings ratio (P0/E1) of 16 and a dividend payout ratio (D1/E1) of 40%. If the growth rate is 4% what is the implied expected rate of return (appropriate discount rate) for company X?
| A.6.5% | |
| B.6.6% | |
| C.2.5% | |
| D.There is insufficient information to determine the expected return. |
please explain , i calculated it to be a
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