Question
XYZ Company has current earnings of $4.20 per share. The company intends to use part of its earnings for investments that will generate a return
XYZ Company has current earnings of $4.20 per share. The company intends to use part of
its earnings for investments that will generate a return of 20%. The cost of capital of XYZ is
15%, and its current stock price is $40. What is the percentage of the earnings XYZ intends
to reinvest (i.e., the retention ratio)? What is the value of XYZ's growth opportunities?
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Fundamentals of Investments, Valuation and Management
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
8th edition
1259720697, 1259720691, 1260109437, 9781260109436, 978-1259720697
