What is the share price if the plowback ratio

Reference no: EM13303282

You are the CEO of company F. The current earnings per share is $10 and the return on equity is 25%. You will resign after next year's dividend due to change of management and the share price after your resignation is expected to be earnings per share at that time multiplied by the current P/E ratio of 9.

What is share price if the plowback ratio is 0.5? What is the share price if the plowback ratio is 0? Explain the reasons for the difference in your two answers.

Reference no: EM13303282

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