63.71 is incorrect for this question

Halliford Corporation expects to have earnings this coming year of $2.872 per share. Halliford plans to retain all of its earnings for the next two years. Then, for the subsequent two years, the firm will retain 53% of its earnings. It will retain 19% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 21.8% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of capital is 8.5%, what price would you estimate for Halliford stock? The stock price will be $ (Round to the nearest cent.) x Try again. The following spreadsheet of Halliford's expected EPS and dividends per share can help determine the present value of the expected dividends. Year 0 1 2. 3 4 5 6 EPS growth rate (versus prior year) EPS Retention ratio Dividend payout ratio Dividends $2.872 100% 0% $0.00 21.8% $3.498 100% 0% $0.00 21.8% $4.261 53% 47% $2.003 11.554% $4.753 53% 47% $2.234 11.554% $5.302 19% 81% $4.295 4.142% $5.522 19% 81% $4.473 From year 5 on, dividends grow at constant rate of 4.142%. Therefore the following formula should be used, Divs PV4 = re-9 The stock price can be found using the following formula for the present value: Div3 Div4 + PVA Po = PVO = (1+re)** (1+r)* OK