If the market price of PQR Ltd. is 44, EPS is 3.75 and the retention ratio is 60%, then the multiplier…
According to Graham and Dodd's dividend valuation model, P = m * (D + E/3). Given EPS (E) = 3.75 and retention ratio = 60% (payout ratio = 40%), Dividend per share (D) =…
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If the market price of PQR Ltd. is 44, EPS is 3.75 and the retention ratio is 60%, then the multiplier according to Graham and Dodd Model of Dividend policy is
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Correct answer C
According to Graham and Dodd's dividend valuation model, P = m * (D + E/3). Given EPS (E) = 3.75 and retention ratio = 60% (payout ratio = 40%), Dividend per share (D) = 0.40 * 3.75 = 1.50; substituting P = 44 gives 44 = m * (1.50 + 3.75/3) = m * (1.50 + 1.25) = 2.75m, yielding a multiplier m = 44 / 2.75 = 16.
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UGC NET Management