Question

Halliford Corporation expects to have earnings this coming year of $ 2.604 per share. Halliford plans to retain all of its earnings for the next two years.​ Then, for the subsequent two​ years, the firm will retain 50 % of its earnings. It will retain 22 % of its earnings from that point onward. Each​ year, retained earnings will be invested in new projects with an expected return of 22.8 % 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 8.5 %​, what price would you estimate for Halliford​ stock? The stock price will be ​$ nothing. ​(Round to the nearest​ cent.)

Answer 1