XYZ Company has expected earnings of $3.00 for next year and usually retains 40 percent for future growth.Its dividends are expected to grow at a rate of 10 percent indefinitely.If an investor has a required rate of return of 15 percent,what price would he be willing to pay for XYZ stock?
A)$12.50
B)$25.00
C)$30.00
D)$36.00

Question

Quizplus · Accepted Answer

The Answer of XYZ Company has expected earnings of $3.00 for next year and usually retains 40 percent for future growth.Its dividends are expected to grow at a rate of 10 percent indefinitely.If an investor has a required rate of return of 15 percent,what price would he be willing to pay for XYZ stock?
A)$12.50
B)$25.00
C)$30.00
D)$36.00

XYZ Company Has Expected Earnings of $3