Royal Hills Corporation pays 30% of its earnings to stockholders and retains 70% to finance growth. The firmrecently paid a $3.20 common stock dividend. Investors require a return of 14% on Royal Hills common stock. If thefirm earns a return on equity of 10%, what should be the value of Royal Hills common stock?O $88.00O $71.25O $48.91O $29.96$54.70

Given that;Return on equity is 10%Now, the corporation retains 70% to finance growth, it means that…

Answered: Royal Hills Corporation pays 30% of its…

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

Section: Chapter Questions

Problem 1PS

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Oweninc has a current stock price of $14.30 and is expected to pay a $0.70 dividend in one year. If Owenlnc's equity cost of capital 11%, what price would Oweninc's stock be expected to sell for immediately after it pays the dividend? OA. $12.14 OB. $15.87 OC. $10.62 OD. $15.17
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