The stock of Nogro Corporation is currently selling for \\( \\$ 10 \\) per share....
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The stock of Nogro Corporation is currently selling for \\( \\$ 10 \\) per share. Earnings per share In the coming year are expected to be \\( \\$ 2 \\). The company has a policy of paying out \50 of Its earnings each year In dividends. The rest is retalned and Invested In projects that earn a \20 rate of return per year. This situation is expected to continue Indefinltely. Required: a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro's Investors require? (Do not round Intermedlate calculations.) b. By how much does its value exceed what It would be If all earnings were pald as dividends and nothing was relnvested? c. If Nogro were to cut Its dividend payout ratlo to \25, what would happen to Its stock price? Stock price would be decreased Stock price would be increased Stock price would be unaffected d. If Nogro eliminated the dividend, what would happen to Its stock price? Stock price would be Increased Stock price would be unaffected Stock price would be decreased
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The stock of Nogro Corporation is currently selling for \\( \\$ 10 \\) per share. Earnings per share In the coming year are expected to be \\( \\$ 2 \\). The company has a policy of paying out \50 of Its earnings each year In dividends. The rest is retalned and Invested In projects that earn a \20 rate of return per year. This situation is expected to continue Indefinltely. Required: a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro's Investors require? (Do not round Intermedlate calculations.) b. By how much does its value exceed what It would be If all earnings were pald as dividends and nothing was relnvested? c. If Nogro were to cut Its dividend payout ratlo to \25, what would happen to Its stock price? Stock price would be decreased Stock price would be increased Stock price would be unaffected d. If Nogro eliminated the dividend, what would happen to Its stock price? Stock price would be Increased Stock price would be unaffected Stock price would be decreased 