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 ? decimal places 32161

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 15P
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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.)
Transcribed Image Text: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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