Answer:
The correct answer is d) Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries.
Explanation:
Option D. represents two situations that perfectly describe the interest that the shareholders pursue: the maximization of the profits of the company where they have their resources invested.
The shareholder, on the other hand, is also an investor, since he contributes capital with a view to obtaining a dividend.
Its investment is said to be in equities, given that there is no contract through which the shareholder will receive fixed fees in return for his investment. Their remuneration is through two ways:
- Dividend
- Increase in the price of the company. This is produced by its good progress and its ability to generate future benefits, as well as by the increase in assets through past benefits.
<span>The equilibrium price will go down and equilibrium quantity will be indeterminate.
Bumper crop refers to a situation when a certain type of crop exeprience sudden bump in productivity. If at that exact time more people become allergic to this crop, the crop would be overly stocked in the warehouse and the owner would most likely sell it at lower price.</span>
Answer:
0.11 or 11%
Explanation:
The computation of the required rate of return is given below:
Required Rate of Return is
= Next Year Dividend ÷ Current Market Price + Growth Rate
= $3.15 ÷ $52.50 + 0.05
= 0.06 + 0.05
= 0.11 or 11%
working note
Given that
Current Market Price = $52.50
As we know that
Growth Rate = Return on Equity × Retained Earning Ratio
Now
Return on Equity = EPS ÷ Book Value of Share
= $5 ÷ 40
= 12.50%
So,
Retained Earning Ratio is
= 1 - Dividend Payout Ratio
= 1 - 0.60
= 0.40
And,
Dividend Payout Ratio = DPS ÷ EPS
= $3 ÷ $5
= 0.60
Now
Growth Rate = 12.50% × 0.40
= 5%
So,
Next Year Dividend = Dividend Recently paid × (1 + growth rate )
= $3 × 1.05
= $3.15
