The stock of Nogro Corporation is currently selling for $18 per share. Earnings per share in the coming year are expected to be $2.80 The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 16% rate of return per year. This situation is expected to continue indefinitely. a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro's investors require? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return 15.78 % b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) PVGO

The stock of Nogro Corporation is currently selling for $18 per share. Earnings per share in the coming year are expected to be $2.80 The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 16% rate of return per year. This situation is expected to continue indefinitely. a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro's investors require? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return 15.78 % b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) PVGO

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Description: te.3 The stock of Nogro Corporation is currently selling for $18 per share. Earnings per share in the coming year are expected to be $2.80.The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and inv

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 3P

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