Ans general 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?

The growth rate g=ROE × Retention Ratiowhere:ROE=11.5%=0.115Retention Ratio = 55% =…

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?
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