EXCEL

5. Sholay Corporation expects to have earnings this coming year of $4 per share. Sholay plans to retain all of its earnings for the next three years. For the subsequent two years, the firm will retain 40% and 50% of its earnings respectively. It will then retain 20% of its earnings from that point onward. Each year retained earnings will be invested in new projects with an expected return of 40% per year. Any earnings that are not retained will be paid out as dividends. Assume Sholay's share count remains constant and all earnings growth comes from the investment of retained earnings. If Sholay's equity cost of capital is 10%, what price would you estimate for Sholay stock