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A firm expects earnings at the end of this year of $10.18 per share, and it plans to pay a $5.44 dividend to shareholder
Posted: Tue Nov 16, 2021 7:47 am
by answerhappygod
- A Firm Expects Earnings At The End Of This Year Of 10 18 Per Share And It Plans To Pay A 5 44 Dividend To Shareholder 1 (19.29 KiB) Viewed 138 times
A firm expects earnings at the end of this year of $10.18 per share, and it plans to pay a $5.44 dividend to shareholders. The firm will retain $4.74 per share of its earnings to reinvest in new projects which have an expected return of 21.8% per year. Suppose that the firm will maintain the same dividend payout rate, retention rate and return on new investments in the future and will not change its number of outstanding shares. Assume that the firm's equity cost of capital is 19.3% per annum. Which of the following is closest to the price that you would estimate for the firm's shares? O a $65.49 O b. $59.46 O c. $71.11 O d. $56.60 O e. $63.53 Of. $62.30 O g. $51.81