Laurel Enterprises pays annual dividends, and the next dividend is expected to be in one year. Laurel expects earnings next year of $4.07 per share and has a 40% retention rate, which it plans to keep constant. Its equity cost of capital is 9%, which is also its expected return on new investment; this is expected to continue forever. What do you estimate the firm's current stock price to be? (Hint: its next dividend is due in one year.) The current stock price will be s (Round to the nearest cent.) * Try again. pects earnings next year of $4.07 per share and expected return on new investment; this is idend is due in one year.) To determine the firm's current stock price, follow these steps. First, the dividend next year can be determined using the following formula. D0=EPSPayoutratio Because Laurel plans to keep its payout rate constant, its dividend growth rate will be the same as its earnings growth rate. You can confirm this using the following formula. g=RetentionrateReturnonnewinvestment Finally, the current stock price can be determined using the following formula. P0=rEgDiv1