Answer:
a. 4.5%
b. $5.643
Explanation:
a. Current Selling price is $60 per share, earnings per share is $5.40, dividend in year end is $2.70. Required rate of return is 9%.
Calculate the growth rate as follows:
Growth rate= 
=9%- $2 70/$60
= 9% - 0.045
= 9% - 4.5%
=4.5%
b. If Spencer reinvests earnings in projects with average returns equal to the stock's expected rate of return.
Calculate the next year's EPS as follows:
Next year EPS = Current EPS X (I + Growth)
=$5.40 x (1 + 4.5%)
=$5.40 x (1 + 0.045)
=$5.40 x (1.045)
$5.643
Therefore, the next year earnings per share (EPS) will be
$5.643
Answer:
Option b) False
Explanation:
Capital structure
This is usually defined as a composition or the combination of debt and equity that are used to finance a firm.
Signaling theory
According to this theory, It states that actions are taken by a firm to send "signals" to shareholders. It states that firms that uses issue debt to raise funds are signaling or projecting that their future prospects are favorable.
In this theory, managers do have information about their firm's prospects than do outside investors. It is also referred to as an action taken by a firm's management that gives possible clues to investors about how management looks at the firm's capital prospects. It centers on the ability to borrow money at a reasonable cost when good investment opportunities comes their way.
Rural internet access, with one dominant provider that faces very little competition, is a good example of – market. it functions as –. by contrast, a flea market or swap meet, where – buyers and sellers get together to conduct transactions, is an example of – market. no single – exerts – control over prices.
The correct answer for this question is this one: The statement presented is TRUE. Hope this helps answer your question and have a nice day ahead.
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