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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Abercrombie & Fitch's common stock pays a dividend of $0.75. It is currently selling for $35.91. If the firm's investors require a return of 15 percent on their investment from buying Abercrombie & Fitch stock, what growth rate would Abercrombie & Fitch have to provide the investors?
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Abercrombie & Fitch's common stock pays a dividend of $3.00. It is currently selling for $30.78. If the firm's investors require a return of 15 percent on their investment from buying Abercrombie & Fitch stock, what growth rate would Abercrombie & Fitch have to provide the investors?
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