Show me the steps to solve Corporation expects to have earnings this coming year of $3.34 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 47 % of its earnings. It will then retain 17 % of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 19.00 % 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 11.8 %, what price would you estimate for Halliford stock?
Show me the steps to solve Corporation expects to have earnings this coming year of $3.34 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 47 % of its earnings. It will then retain 17 % of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 19.00 % 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 11.8 %, what price would you estimate for Halliford stock?
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
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Transcribed Image Text:Show me the steps to solve Corporation expects to have earnings this coming year of $3.34
per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent
two years, the firm will retain 47 % of its earnings. It will then retain 17 % of its earnings from
that point onward. Each year, retained earnings will be invested in new projects with an
expected return of 19.00 % 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 11.8 %, what
price would you estimate for Halliford stock?
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