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you expect a share of stock to generate earnings per share of $4, $4.5 and $5 for each of the next 3 years. After that,
you expect a share of stock to generate earnings per share of $4, $4.5 and $5 for each of the next 3 years. After that, the earnings and dividends will grow at the sustainable growth rate until infinity.
If the company maintains a stable payout ratio of 60% for its dividends and generates a rate of return of 20% on its equity, what is the sustainable growth rate?
Assuming investors expect a 12% rate of return on the stock, what is the price of the stock today?
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