Calculate the price differential for this company

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Reference no: EM131957760

Investors have invested $20,000 in common equity in a company. The investors expect that the company will reinvest all income back into projects.

The company is forecasted to earn $6,000 the first year, $5,000 the second year, $4,750 the third year, and $5,442 each year after the third year.

The company's stock price at middle of first year is $15 per share.

If the company has 3,500 shares outstanding and the risk-free rate of interest is 8%, calculate the price differential for this company.

Reference no: EM131957760

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