Halliford Corporation expects to have earnings this coming year of $2.765 per share. Halliford plans to retain all of ts earnings for the next two years. Then, for the subsequent two years, the firm will retain 51% of its earnings. It w retain 17% of its earnings from that point onward. Each year, retained earnings will be invested in new projects wit an expected return of 22.1% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of capital is 9.2%, what price would you estimate for Halliford stock? The stock price will be $ (Round to the nearest cent.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Halliford Corporation expects to have earnings this coming year of $2.765 per share. Halliford plans to retain all of
its earnings for the next two years. Then, for the subsequent two years, the firm will retain 51% of its earnings. It will
retain 17% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with
an expected return of 22.1% per year. Any earnings that are not retained will be paid out as dividends.
Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained
earnings. If Halliford's equity cost of capital is 9.2%, what price would you estimate for Halliford stock?
The stock price will be $
(Round to the nearest cent.)
Transcribed Image Text:Halliford Corporation expects to have earnings this coming year of $2.765 per share. Halliford plans to retain all of its earnings for the next two years. Then, for the subsequent two years, the firm will retain 51% of its earnings. It will retain 17% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 22.1% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of capital is 9.2%, what price would you estimate for Halliford stock? The stock price will be $ (Round to the nearest cent.)
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