Task: The dividend payout ratio for firm ABC is 60%, k is 13% and the expected growth of dividends is 7%.
a) What is the current earnings multiplier?
b) You expect the payout ratio to decline to 50%, all else equal. What is the new earnings multiplier?
c) With the payout ratio at 60%, the rate of inflation increases 3% while the growth rate increases 2%. What is the new earnings multiplier?
d) With the payout ratio at 60%, the rate of inflation is expected to drop by 3% while the growth rate decreases by 1%. What is the new earnings multiplier?