Question
The stock of Nogro Corporation is currently selling for $24 per share. Earnings per share in the coming year are expected to be $3.40. The
The stock of Nogro Corporation is currently selling for $24 per share. Earnings per share in the coming year are expected to be $3.40. The company has a policy of paying out 40% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 22% rate of return per year. This situation is expected to continue indefinitely. |
a. | Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogros investors require? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started