Need answer of this financial accounting Juggernaut Satellite Corporation earned $18 million for the fiscal year ending yesterday.The firm also paid out 30 percent of its earnings as dividends yesterday. The firm willcontinue to pay out 30 percent of its earnings as annual, end-of-year dividends. Theremaining 70 percent of earnings is retained by the company for use in projects. Thecompany has 2 million shares of common stock outstanding. The current stock price is $93.The historical return on equity (ROE) of 13 percent is expected to continue in the future.What is the required rate of return on the stock?

Step 1: Define Return on EquityReturn on Equity or ROE reveals earnings of an entity concerning…

Answered: Juggernaut Satellite Corporation earned…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 13P

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Mercury Satellite Corporation earned $20 million for the fiscal year ending yesterday. The firm's policy is to pay out 30 percent of its earnings as dividends. The remaining 70 percent of earnings is retained by the company for use in projects. The company has 2 million shares of common stock outstanding. The current stock price is $90. The historical return on equity (ROE) of 15 percent is expected to continue in the future. What is the required rate of return on the stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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Is my answer correct? I feel as if I am missing a few steps. AFW Industries has 201 million shares outstanding and expects earnings at the end of this year of $673 million. AFW plans to pay out 61% of its earnings in total, paying 34% as a dividend and using 27% to repurchase shares. If AFW's earnings are expected to grow by 8.9% per year and these payout rates remain constant, determine AFW's share price assuming an equity cost of capital of 12.1%. Formula is g = ROE x b Do the opposite of the formula G = 8.9%; payout is 61% (1 - .61 = .39) 9% - .39 = .89 -.39 = .5

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