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24 a firms earnings per share increased from 10 to 12

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24. A firm's earnings per share increased from $10 to $12, dividends increased from $4.00 to$4.80, and the share price increased from $80 to $90. Given this information, it follows that________.A.the stock experienced a drop in the P/E ratioB.the firm had a decrease in dividend payout ratioC.the firm increased the number of shares outstandingD.the required rate of return decreasedE.none of the above
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$80/$10 = 8; $90/$12 = 7.5.
25. Consider the free cash flow approach to stock valuation. F&G Manufacturing Company isexpected to have before-tax cash flow from operations of $750,000 in the coming year. Thefirm's corporate tax rate is 40%. It is expected that $250,000 of operating cash flow will beinvested in new fixed assets. Depreciation for the year will be $125,000. After the comingyear, cash flows are expected to grow at 7% per year. The appropriate market capitalizationrate for unleveraged cash flow is 13% per year. The firm has no outstanding debt. Theprojected free cash flow of F&G Manufacturing Company for the coming year is _______.
Calculations are shown below.7
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Term
Winter
Professor
DoctorSazali
Tags
Time Value Of Money, Dividend yield, P E ratio

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