Agnes collects the following data on the return on equity (ROE) and the payout ratio for two companies, M and N. Using a required return of 12.4% for both companies, she computes the justified forward P/E ratios, which are also given below:
If Company M increases its dividend payout ratio to 40% and Company N decreases its dividend payout ratio to 30%, which of the following will most likely occur? The justified forward P/E ratio of…………………

Question

Agnes collects the following data on the return on equity (ROE) and the payout ratio for two companies, M and N. Using a required return of 12.4% for both companies, she computes the justified forward P/E ratios, which are also given below:  
  If Company M increases its dividend payout ratio to 40% and Company N decreases its dividend payout ratio to 30%, which of the following will  most likely  occur? The justified forward P/E ratio of…………………

Answer

company A would decrease but company B would increase

Answer

both companies would increase

Answer

both companies would decrease

Answer

company A would increase but company B would decrease

Crowdly

Agnes collects the following data on the return on equity (ROE) and the payout ...

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