Halliford Corporation expects to have earnings this coming year of $3.29 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 48% 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 24.4% 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 11.5%, what price would you estimate for Halliford stock? The stock price will be $ (Round to the nearest cent)

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 9P
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Halliford Corporation expects to have earnings this coming year of $3.29 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 48% 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 24.4% 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 11.5%, 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 $3.29 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 48% 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 24.4% 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 11.5%, what price would you estimate for Halliford stock? The stock price will be $ (Round to the nearest cent)
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