Haliford Corporation expects to have eamings this coming year of $2.986 per share. Haliford plans to retain all of its eamings for the next two years. Then, for the subsequent two years, the firm will retain 46% of its eamings. It will retain 22% of its eamings from that point onward. Each year, retained earnings will be invested in new projects with an expected retum of 23.8% per year. Any eamings that are not retained will be paid out as dividends. Assume Haliford's share oount remains constant and all eamings growth comes trom the investment of retained eamings. If Haliford's equity cost of capital is 9.3%, what price would you estimate for Haliford stock? The stock price will be S (Round to the nearest cent)

Haliford Corporation expects to have eamings this coming year of $2.986 per share. Haliford plans to retain all of its eamings for the next two years. Then, for the subsequent two years, the firm will retain 46% of its eamings. It will retain 22% of its eamings from that point onward. Each year, retained earnings will be invested in new projects with an expected retum of 23.8% per year. Any eamings that are not retained will be paid out as dividends. Assume Haliford's share oount remains constant and all eamings growth comes trom the investment of retained eamings. If Haliford's equity cost of capital is 9.3%, what price would you estimate for Haliford stock? The stock price will be S (Round to the nearest cent)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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Halliford Corporation expects to have earnings this coming year of $3.000 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 20% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 25.0% 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 10.0%, what price would you estimate for Halliford stock?
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Halliford Corporation expects to have earnings this coming year of $3.32 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 55% of its earnings. It will then retain 20% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 25.98% 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 8.1%, what price would you estimate for Halliford stock? Note: Remember that growth rate is computed as retention rate × rate of return.