Halliford Corporation expects to have earnings this coming year of $ 2.75 per share. Halliford plans...

Halliford Corporation expects to have earnings this coming year of $ 2.75 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent twoyears,the firm will retain 52 % of its earnings. It will then retain 18 % of its earnings from that point onward. Eachyear,retained earnings will be invested in new projects with an expected return of 21.27 %per year. Any earnings that are not retained will be paid out as dividends. AssumeHalliford'sshare count remains constant and all earnings growth comes from the investment of retained earnings. IfHalliford'sequity cost of capital is 10.8 % what price would you estimate for Halliardstock?

Note:Remenber that growth rate is computedas:retention rate times rate of return.

Expert Solution

jeff jeffy answered 1 year ago

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