Question: The company just generated total earnings of $100,000 today and after repurchasing shares, there are currently 10,000 shares outstanding. The company's return on new investment is 10%. The dividend payout ratio is 40%, and the firm uses 10% of earnings to repurchase shares each year. Consider the total payout model and assume that the cost of capital is 11%.
a) What is the retention rate?
b) What must be the growth rate of earnings?
c) What is the total projected earnings one year from now?
d) What is the Total Payout amount one year from now?
e) What is the total value of the firm's equity and the price per share today?
f) What is the dividend yield?
g) What is the growth rate of dividends?