Modesto Satellite Co. earned $30 million for the fiscal year ending yesterday. The firm also paid...

Modesto Satellite Co. earned $30 million for the fiscal year ending yesterday. The firm also paid out 60 percent of its earnings as dividends yesterday. The firm will continue to pay out 60 percent of its earnings as annual, end-of-year dividends. The remaining 40 percent of earnings is retained by the company for use in projects. The company has 9 million shares of common stock outstanding. The current stock price is $35. The historical return on equity (ROE) of 12 percent is expected to continue in the future. What is the required rate of return on the stock? (Hint: Use the DGM and the sustainable growth rate for g.)

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jeff jeffy answered 2 years ago

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