In the Model P/E = (D₁/E₁)/(k - G), the P/E

question 83

Essay

In the model P/E = (D₁/E₁)/(k - g), the P/E should increase if the dividend payout ratio increases, other things the same. If the payout ratio was intentionally increased by the board of directors, other things are likely not to stay the same. What is likely to happen to the dividend growth rate and the required return?

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