Question

Halliford Corporation expects to have earnings this coming year of $ 2.74 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two​ years, the firm will retain 54 % 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 21.53 % 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?​Note: Remenber that growth rate is computed​ as: retention rate times× rate of return.

The price per share is $ nothing. (Round to the nearest​ cent.)

Answer 1