MF Corp. has an ROE of 14% and a plowback ratio of 75%. The market capitalization rate is 13%. a. If the coming year's earnings are expected to be $2.30 per share, at what price will the stock sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. What price do you expect MF shares to sell for in three years? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

EBK CFIN
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ISBN:9781337671743
Author:BESLEY
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Chapter11: The Cost Of Capital
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Problem 18-9
MF Corp. has an ROE of 14% and a plowback ratio of 75%. The market capitalization rate is 13%.
a. If the coming year's earnings are expected to be $2.30 per share, at what price will the stock sell? (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Price
b. What price do you expect MF shares to sell for in three years? (Do not round intermediate calculations. Round your answer to 2
decimal places.)
Price
Transcribed Image Text:Problem 18-9 MF Corp. has an ROE of 14% and a plowback ratio of 75%. The market capitalization rate is 13%. a. If the coming year's earnings are expected to be $2.30 per share, at what price will the stock sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. What price do you expect MF shares to sell for in three years? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price
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