Question
In: Finance
1. You expect that Bean Enterprises will have earnings per share of $2 for the coming...
1. 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 of 20% per year. If Bean's equity cost of capital is 10%, what is the price of a share of Bean's stock?
Hint: use g=ROE*retention ratio to calculate growth rate
Solutions
Expert Solution
Price of share of Bean Stock is $36.24
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