Question

High Tech Chip Company paid a dividend last year of $2.50. The expected ROE for next year is 12.5%. An appropriate required return on the stock is 11%. If the firm has a plowback ratio of 60%, the dividend in the coming year should be

A. $1.00.

B. $2.50.

C. $2.69.

D. $2.81.

E. None of the options are correct.

Answer

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