Question
Los Pollos Hermanos is a public company that is expected to pay out 10% of its earnings per share as dividends over the next 3
Los Pollos Hermanos is a public company that is expected to pay out 10% of its earnings per share as dividends over the next 3 years. The other 90% of the earnings will be invested in opening new locations of its chain restaurant. Due to this growth, you expect Los Pollos Hermanos's EPS to be $5.00, $7.00, $12.00 and $15.00 in the next four years. After 4 years, you expect Los Pollos Hermanos to slow down expansion and thus begin paying out 90% of earning as dividends. The remaining 10% will be invested in opening stores that earn a 12% return. Thus, Los Pollos Hermanos's EPS will grow at a rate of 1.2%. Investors in tech stocks as risky as Los Pollos Hermanos expect to earn a 10% rate of return. What do you expect the price of Los Pollos Hermanos's stock to be 3 years from today?
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