CHAPTER 12 PROBLEM 5

FINANCE  Investment Analysis and Portfolio Management CHAPTER 12 PROBLEM 5
 Currently,   the   dividend-payout   ratio(D/E)   for   the   aggregate   market   is   60   percent,   the   required return (k) is 11 percent  ，  and the expected growth rate for dividends(g)is 5 percent.     
    a. Compute the current earnings multiplier.        
 b. You expect the D/E ratio to decline to 50 percent, but you assume there will be no other   changes. What will be the P/E?        
 c. Starting with the initial conditions. You expect the dividend-payout ratio to be constant  ，  the rate of inflation to increase by 3 percent, and the growth rate to increase by 2 percent.   Compute the expected P/E.    
     d. Starting with the initial conditions, you expect the dividend-payout ratio to be constant,   the   rate   of   inflation   to   decline   by   3   percent,   and   the   growth   rate   to   decline   by   1   percent.   Compute the expected P/E.

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