Halliford Corporation expects to have earnings this coming year of $2.73 per share. Halliford plans to retain all of its earnings for the next two years. Then, for the subsequent two years, the firm will retain 45% of its earnings. It will retain 21% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 18.1% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of capital is 10.3%, what price would you estimate for Halliford stock? The stock price will be $☐ (Round to the nearest cent.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Halliford Corporation expects to have earnings this coming year of $2.73 per share. Halliford plans to retain all of its
earnings for the next two years. Then, for the subsequent two years, the firm will retain 45% of its earnings. It will retain
21% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected
return of 18.1% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count
remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of
capital is 10.3%, what price would you estimate for Halliford stock?
The stock price will be $
(Roun
to the nearest cent.)
Transcribed Image Text:Halliford Corporation expects to have earnings this coming year of $2.73 per share. Halliford plans to retain all of its earnings for the next two years. Then, for the subsequent two years, the firm will retain 45% of its earnings. It will retain 21% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 18.1% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of capital is 10.3%, what price would you estimate for Halliford stock? The stock price will be $ (Roun to the nearest cent.)
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