You expect that Bean Enterprises will have earnings per share of $2 for the coming year· Bean plans to retain all of its earnings for the next three years. For the subsequent two years, the firm plans on retaining 50% of its earnings. It will then retain only 25% of its earnings from that point forward. Retained earnings will be invested in projects with an expected return of20% per year. If Bean’s equity cost of capital is 12%, then the price of a share of Bean's stock is closest to:
You expect that Bean Enterprises will have earnings per share of $2 for the coming year· Bean plans to retain all of its earnings for the next three years. For the subsequent two years, the firm plans on retaining 50% of its earnings. It will then retain only 25% of its earnings from that point forward. Retained earnings will be invested in projects with an expected return of20% per year. If Bean’s equity cost of capital is 12%, then the price of a share of Bean's stock is closest to:
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 22P
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You expect that Bean Enterprises will have earnings per share of $2 for the coming year· Bean plans to retain all of its earnings for the next three years. For the subsequent two years, the firm plans on retaining 50% of its earnings. It will then retain only 25% of its earnings from that point forward.
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