(Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling in the market for $17. Dividends of $1.87 per share were paid last year, return on equity is 23 percent, and its retention rate is 25 percent. a. What is the value of the stock to you, given a required rate of return of 16 percent? b. Should you purchase this stock?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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(Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling in the market for $17. Dividends of $1.87 per share were paid last year, return on equity is 23 percent, and its retention
rate is 25 percent.
a. What is the value of the stock to you, given a required rate of return of 16 percent?
b. Should you purchase this stock?
a. Given a required rate of return of 16 percent, the value of the stock to you is $
(Round to the nearest cent.)
Transcribed Image Text:(Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling in the market for $17. Dividends of $1.87 per share were paid last year, return on equity is 23 percent, and its retention rate is 25 percent. a. What is the value of the stock to you, given a required rate of return of 16 percent? b. Should you purchase this stock? a. Given a required rate of return of 16 percent, the value of the stock to you is $ (Round to the nearest cent.)
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