You expect KT industries (KTI) will have earnings per share of $3 this year and expect that they will pay out $2.50 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 16% and their equity cost of capital is 12%. The value of a share of KTI's stock is closest to: A. $10.72 B. $16.07 C. $32.15 D. $26.79

You expect KT industries (KTI) will have earnings per share of $3 this year and expect that they will pay out $2.50 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 16% and their equity cost of capital is 12%. The value of a share of KTI's stock is closest to: A. $10.72 B. $16.07 C. $32.15 D. $26.79

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 12P

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Question

You expect KT industries (KTI) will have earnings per share of

this year and expect that they will pay out

$2.50

of these earnings to shareholders in the form of a dividend. KTI's return on new investments is

16%

and their equity cost of capital is

12%.

The value of a share of KTI's stock is closest to:

$10.72

$16.07

$32.15

$26.79

Formula Formula ROI (%) = Net Income Principal Amount × 100

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