g = ROE * (1 - payout ratio)...solve for payout ratio...
0.12 = 0.16 * ( 1 - POR)
0.12 / 0.16 = (1 - POR)
0.75 = (1 - POR)
POR = 0.25
since 25% of earnings are paid out in dividends...
EPS = Dividend / POR
EPS = $3 / 0.25 = $12
P/E * EPS = Price
Price = 18.5 * $12 = $222
P/E ie 18.5 means stock is not expensive
ROE 16% means business has growth of 16%
dividend is $3 but what is the market price of the share? say P
3/P*100 is the dividend % on investment
It apears stock is ok for investment
look for the book value. high book value is good
Joker stock has a sustainable growth rate of 12 percent, ROE of 16 percent, and dividends per share of $3. If the P/E ratio is 18.5, what is the value of a share of stock?
If someone could help explain this for me?
