Chiptech, Inc., is an established comp
Chiptech, Inc., is an established computer chip firm with several profitable existing products as well as some promising new products in development. The company earned $1 a share last year, and just paid out a dividend of $.50 per share. Investors believe the company plans to maintain its dividend payout ratio at 50%. ROE equals 20% [growth rate is estimated as ROE*plowback ratio. Plowback ratio is also (1-payout ratio)]. Everyone in the market expects this situation to persist indefinitely.
Uter chip firm with several profitable existing products as well as some promising new products in development. The company earned $1 a share last year, and just paid out a dividend of $.50 per share. Investors believe the company plans to maintain its dividend payout ratio at 50%. ROE equals 20% [growth rate is estimated as ROE*plowback ratio. Plowback ratio is also (1-payout ratio)]. Everyone in the market expects this situation to persist indefinitely.