The Farmer Co. has a payout ratio of 65% and a return on equity (ROE) of 16% (assume that this is expected ROE for the upcoming year). What will be the appropriate price-to-book value (PBV) based on return differential if the expected growth rate in dividends is 5.6% and the required rate of return is 13% ?
The Farmer Co. has a payout ratio of 65% and a return on equity (ROE) of 16% (assume that this is expected ROE for the upcoming year). What will be the appropriate price-to-book value (PBV) based on return differential if the expected growth rate in dividends is 5.6% and the required rate of return is 13% ?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 16MC
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![The Farmer Co. has a payout ratio of 65% and a return on equity (ROE) of 16% (assume that this is
expected ROE for the upcoming year). What will be the appropriate price-to-book value (PBV)
based on return differential if the expected growth rate in dividends is 5.6% and the required rate of
return is 13% ?](https://content.bartleby.com/qna-images/question/04bbbad9-d0cb-46e9-b0b8-beace5cb56db/d0938bfc-b7cf-4324-bb89-28eccca7c404/1h491nm_thumbnail.jpeg)
Transcribed Image Text:The Farmer Co. has a payout ratio of 65% and a return on equity (ROE) of 16% (assume that this is
expected ROE for the upcoming year). What will be the appropriate price-to-book value (PBV)
based on return differential if the expected growth rate in dividends is 5.6% and the required rate of
return is 13% ?
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