Current Attempt in ProgressX Your answer is incorrect.Management of Oriole, a biotech firm, forecasted the following growth rates for the next three years: 35 percent, 28 percent, and 22percent. Management then expects the company to grow at a constant rate of 9 percent forever. The company paid a dividend of $1.70last week. If the required rate of return is 20 percent, what is the value of this stock? (Round intermediate calculations and final answer to2 decimal places, e.g. 15.20.)Value of stock$29.00

Growth Rate for year 1 = g1 = 35%Growth Rate for year 2 = g2 = 28%Growth Rate for year 3 = g3 =…

Answered: Management of Oriole, a biotech firm,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 16P

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Calculation of gL and EPS Spencer Suppliess stock is currently selling for 60 a share. The firm is expected to earn 5.40 per share this year and to pay a year-end dividend of 3.60. a. If investors require a 9% return, what rate of growth must be expected for Spencer? b. If Spencer reinvests earnings in projects with average returns equal to the stocks expected rate of return, then what will be next years EPS? [Hint: gL = ROE Retention ratio.)
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