Question

Halliford Corporation expects to have earnings this coming year of

$ 2.938

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

48%

of its earnings. It will retain

20%

of its earnings from that point onward. Each​year, retained earnings will be invested in new projects with an expected return of

21.2 %21.2%

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

10.2%,

what price would you estimate for Halliford​ stock?

Answer 1