X = 7 , Y = 1

QUESTION 21 The stock of Norge Corporation is currently selling for $20 per share. Earnings per share in the coming year are expected to be sx. The company has a policy of paying out Yon of its earnings each year in dividends. The rest is retained and invested in projects that earn a 10 rate of return per year. This situation is expected to continue indefinitely Assuming the current market price of the stock reflects its intrinsic frue) value as computed using the constant growth DOM, what rate of return de Norgre's shareholders require? the number is a use 1)