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Kirk Co. is expected to have EPS of $4.75 next year and it normally pays out...

Kirk Co. is expected to have EPS of $4.75 next year and it normally pays out all of the earnings as dividends. If Kirk Co. has an ROE of 14% and required return of 14%, what should be its stock price?

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Expert Solution

Answer:

Calculation of the stock price:

Formula, we will be using to calculate stock price today:

Stock price = EPS in year 1 / Required rate of return

= $ 4.75 /14%

= $ 4.75 / 0.14

= $33.93

So, its stock price should be $33.93 (Answer)

jeff jeffy answered 2 years ago
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