(Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling in the market for $30. Dividends of $2.52 per share were paid last year, return on equity is 32 percent, and its retention rate is 25 percent.

a.What is the value of the stock to you, given a required rate of return of 18 percent?

b.Should you purchase this stock? Please show your work in detail. Thanks so much for your help!

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Part 1

a.

Given

a required rate of return of

18

percent, the value of the stock to you is

$34.02

.

(Round to the nearest cent.)