Muji earned $10 million for the fiscal year. The firm also paid out 25 percent of its earning as dividend. This policy remains in foreseeable future. The remaining 75 percent of earnings is retained for further investment. The company has 1.25 million shares of common stock outstanding. The current stock price is $40.00. Based on its recent financial statement, its return on equity is 11 percent and is expected to continue in the future. Compute the required rate of return on the stock. **D1= 2(1+g) or D1 = 2? Why

Muji earned $10 million for the fiscal year. The firm also paid out 25 percent of its earning as dividend. This policy remains in foreseeable future. The remaining 75 percent of earnings is retained for further investment. The company has 1.25 million shares of common stock outstanding. The current stock price is $40.00. Based on its recent financial statement, its return on equity is 11 percent and is expected to continue in the future. Compute the required rate of return on the stock. **D1= 2(1+g) or D1 = 2? Why

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 4P

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