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  1. business
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  3. assume that you have a company that makes $4 per s

Assume that you have a company that makes $4 per share in net income return,...

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Accounting

Assume that you have a company that makes $4 per share in net income return, that the return on new investments is 30%, that investors require a 15% rate of return on companies of this type, payout ratio of 80%. a) If the returns on new investments is x%, what would be the price of the stock as a function of x? what would be the corresponding stock prices for the following values of x: 5, 25, 50, 75? Assume all the other variables are the same as before b) If the company were to payout y% of their earnings, what would be the price of the stock? what would be the corresponding stock prices for the following values of y: 5, 25, 50, 75? Assume all the other variables are the same as before c) If the required return of the company is z%, what would be the price of the stock as a function of z? what would be the corresponding stock prices for the following values of z: 5, 10, 15, 20? Assume all the other variables are the same as before

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