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A firm earns return on investment at the rate of 20%, earning per share is Rs. 15, payout ratio is 50%, cost of equity is 12%; the market price per share as per Walter's model is:  
  • a)
    Rs. 300
  • b)
    Rs. 240
  • c)
    Rs. 75
  • d)
    Rs. 166.67
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
A firm earns return on investment at the rate of 20%, earning per shar...
Walter's formula for calculating market price per share is as follows:

Where:
P = Market price per share
D = Dividend per share
E = Earnings per share
r = Return on investment
ke = Cost of equity of equity capital
So, according to the question:
When earnings per share is Rs.15 and payout ratio is 50%, then dividend (D) will be 50% of 15 = Rs. 7.5.

(Note: We got decimal values by converting percentage values into decimals.)
P = Rs. 166.67
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Community Answer
A firm earns return on investment at the rate of 20%, earning per shar...
Walter's formula for calculating market price per share is as follows:

Where:
P = Market price per share
D = Dividend per share
E = Earnings per share
r = Return on investment
ke = Cost of equity of equity capital
So, according to the question:
When earnings per share is Rs.15 and payout ratio is 50%, then dividend (D) will be 50% of 15 = Rs. 7.5.

(Note: We got decimal values by converting percentage values into decimals.)
P = Rs. 166.67
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A firm earns return on investment at the rate of 20%, earning per share is Rs. 15, payout ratio is 50%, cost of equity is 12%; the market price per share as per Walters model is:a)Rs. 300b)Rs. 240c)Rs. 75d)Rs. 166.67Correct answer is option 'D'. Can you explain this answer?
Question Description
A firm earns return on investment at the rate of 20%, earning per share is Rs. 15, payout ratio is 50%, cost of equity is 12%; the market price per share as per Walters model is:a)Rs. 300b)Rs. 240c)Rs. 75d)Rs. 166.67Correct answer is option 'D'. Can you explain this answer? for UGC NET 2024 is part of UGC NET preparation. The Question and answers have been prepared according to the UGC NET exam syllabus. Information about A firm earns return on investment at the rate of 20%, earning per share is Rs. 15, payout ratio is 50%, cost of equity is 12%; the market price per share as per Walters model is:a)Rs. 300b)Rs. 240c)Rs. 75d)Rs. 166.67Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for UGC NET 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A firm earns return on investment at the rate of 20%, earning per share is Rs. 15, payout ratio is 50%, cost of equity is 12%; the market price per share as per Walters model is:a)Rs. 300b)Rs. 240c)Rs. 75d)Rs. 166.67Correct answer is option 'D'. Can you explain this answer?.
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