Nike corporation has expected earnings of$1.25 per share and a return of 12%. Youanticipate Nike's earnings will grow at 5% peryear indefinitely and Nike will retain its 40%plowback ratio. By how much does Nike's ROEexceed the stock's return?A. 2%B. 1%C. 1.5%D. 0.5%

in this we have to find out return on equity and find out the difference.

Answered: year indefinitely and Nike plowback…

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year indefinitely and Nike plowback ratio. By how m exceed the stock's return А. 2% В. 1% C. 1.5% D. 0.5%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 2P

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Question

Nike corporation has expected earnings of
$1.25 per share and a return of 12%. You
anticipate Nike's earnings will grow at 5% per
year indefinitely and Nike will retain its 40%
plowback ratio. By how much does Nike's ROE
exceed the stock's return?
A. 2%
B. 1%
C. 1.5%
D. 0.5%

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