What will be the share price if firm decreases payout ratio, Accounting Basics

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What will be the share price if firm decreases payout ratio

Problem

World Telecom, a telecommunication firm based in Singapore, is expected to pay S$3.5 of dividend per share next year. World Telecom's expected earnings per share for the next year is S$10.5. It is expected to grow forever at a rate of 4%. Its cost of equity is 6%. Its return on equity is 6%.

1. What is its share price?

2. What will be the share price if the firm increases the payout ratio to 100%?

3. What will be the share price if the firm decreases the payout ratio to 10%?

4. What will be the share price if the firm increases the plowback ratio to 100%?

5. What will be the effect on share price if the firm increases the payout ratio when the firm's return on equity is above 6%?

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Accounting Basics: What will be the share price if firm decreases payout ratio

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Accounting Basics: What will be the share price if firm decreases payout ratio

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