USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 116

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The aggregate market currently has a retention ratio of 60 percent, a required rate of return of 12 percent, and an expected growth rate for dividends of 4 percent.
-Refer to Exhibit 9.9. If the payout ratio changes to 50 percent, but there are no other changes, what will be the new P/E?

• A) 3.25
• B) 4.16
• C) 5.75
• D) 6.25
• E) 7.67

---

Definitions:

Account Balance

The total amount of money in a financial account, calculated by subtracting total debits from total credits.

Credit

An accounting entry that increases liabilities or equity or decreases an asset or expense account.

Acquisition Method

An accounting procedure for recording the purchase of one company by another, focusing on fair value assessments of acquired assets and liabilities.