The cost of capital of a firm is 12% and its expected Earning Per Share at the end of the year is ₹20. Its existing payout ratio is 25%. The company is planning to increase its payout ratio to 50%. What will be the effec
CS Executive · Financial and Strategic Management · PYQS · December 2019
The cost of capital of a firm is 12% and its expected Earning Per Share at the end of the year is ₹20. Its existing payout ratio is 25%. The company is planning to increase its payout ratio to 50%. What will be the effect of this change on the market price of equity shares (MPS) of the company as per Gordon's model, if the reinvestment rate of the company is 15% ?
Answer & Explanation:
Correct Answer: Option (B)
Official answer key: (B).
Topics: Financial Management
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