Laurel Enterprises expects earnings next year of $4 per share and has a 70% retention rate, which

Question:

Laurel Enterprises expects earnings next year of $4 per share and has a 70% retention rate, which it plans to keep constant. Its equity cost of capital is 10%, which is also its expected return on new investment. If its earnings are expected to grow forever at a rate of 4% per year, what do you estimate the firm’s current stock price to be?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...

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