Finding the Required Return Regenboog NV earned 68 million for the fiscal year ending yesterday. The firm

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Finding the Required Return Regenboog NV earned €68 million for the fiscal year ending yesterday.

The firm also paid out 25 per cent of its earnings as dividends yesterday. The firm will continue to pay out 25 per cent of its earnings as annual, end-of-year dividends. The remaining 75 per cent of earnings is retained by the company for use in projects. The company has 1.25 million shares of equity outstanding.

The current share price is €272. The historical return on equity (ROE) of 12 per cent is expected to continue in the future. What is the required rate of return on the equity?

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Corporate Finance

ISBN: 9781526848093

4th Edition

Authors: David Hillier

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