6. Suppose the Price/Earnings Ratio for the S&P 500 is 20 and the dividend payout ratio...

6. Suppose the Price/Earnings Ratio for the S&P 500 is 20 and the dividend payout ratio of the S&P 500 is 30%. The future growth rate of dividends is expected to be 3%.

a. Use Goal Seek or Solver to determine the dividend payout ratio that would yield an expected Market return of 6%.

Solutions

Expert Solution

Solution: Please refer below image to understand calculation of expected dividend payout ratio that would yield an expected market return of 6%, using Goal Seek :

Therefore , the dividend payout ratio will be 60% to yield an expected market return of 6%.

jeff jeffy answered 1 year ago

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