3. (TCO A) If net income, total assets, and book value of equity stayed the same, what would be the effect on the DuPont Identity of an increase in sales? (Points : 20)
4. (TCO D) A stock pays an annual dividend of $2.50 and that dividend is not expected to change. Similar stocks pay a return of 10%. What is P0? (Show workings) (Points : 20)
5. (TCO D) A stock has just declared an annual dividend of $2.25 to be paid one year from today. The dividend is expected to grow at a 7% annual rate. The return on equity for similar stocks is 12%. What is P0? (Show workings) (Points : 20)
3. (TCO A) If net income, total assets, and book value of equity stayed the same, what
would be the effect on the DuPont Identity of an increase in sales? (Points: 20)
Answer:
Decomposition of ROE…