Provide solution for this accounting question Dalton inc. has an 11.5 percent return on equity andretains 55 percent of its earnings for reinvestmentpurposes. It recently paid a dividend of $3.25 and thestock is currently selling for $40.a. What is the growth rate for Dalton Inc.?b. What is the expected return for Dalton's stock?c. If you require a 13 percent return, should you investin the firm?

Given:- Return on Equity (ROE) = 11.5%- Retention Rate (b) = 55% = 0.55- Recent Dividend (D0) =…

Answered: Dalton inc. has an 11.5 percent return…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 5MC

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Dalton Inc. has a return on equity of 10.6 percent and retains 54 percent of its earnings for reinvestment purposes. It recently paid a dividend of $3.25 and the stock is currently selling for $42. a. What is the growth rate for Dalton Inc.? b. What is the expected return for Dalton's stock? c. If you require a 14 percent return, should you invest in the firm?
Bates, Inc. pays a dividend of $1.00 and is currently selling for $32.50. If investors require a 12% returnon their investment from buying Bates stock, what growth rate would Bates Inc. have to provideinvestors?
Wayne, Inc.'s outstanding common stock is currently selling in the market for $54. Dividends of $3.16 per share were paid last year, return on equity is 35 percent, and its retention rate is 26 percent. a. What is the value of the stock to you, given a required rate of return of 17 percent? b. Should you purchase this stock?
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Assume that you are a consultant to Broske Inc., and you have been provided with the following data: the next expected dividend is $0.67; the current market price is $42.50 and the constant growth rate for the dividends is 8.00% Based on the information given what is the cost of equity?
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