Problem
A company has a required return of 16%, a profit margin of 3%, a D/E ratio of 1 and total asset turnover of 2 and just paid a $3.00 Dividend.
i. The company has a dividend payout ratio of 20%; calculate the price and forward P/E ratio.
ii. If the company changed its dividend payout ratio to 40%, calculate the price and forward P/E ratio?