Question
Fort expects to have earnings of $3 per share for the coming year. The company plans to retain all of its profits from next year
Fort expects to have earnings of $3 per share for the coming year. The company plans to retain all of its profits from next year (year 1) and retain 50% of the profits the following year (year 2). of the profits the following year (year 2). Thereafter (3, 4, ...) it will retain 20% of these. Each year, the retained earnings will be invested in new projects with expected profitability of 25% per year. of 25% per year. Non-retained earnings will be paid in the form of annual dividends, which are paid at the end of the corresponding year. The non-retained earnings will be paid in the form of annual dividends, which are paid at the end of the corresponding year. Assume that the number of Fort's shares remains constant and all of its earnings growth remains constant. constant and all of its earnings growth comes from the investment of those it retains. If the company's cost of stockholders' equity is 10%, what is the price you would determine for Fort's stock? determine for Fort's stock?
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