Determine the long-run earnings growth rate

Reference no: EM13197550

Mag-Lev Wind Turbines (MLWT) expects to have earnings for the fiscal year ending (in six years) on March 22, 2019 of $5.00 per share. At this time, MLWT is expected to pay its first- ever dividend of $3.00 per share. Beginning with the 2019 fiscal year end, and continuing in perpetuity, MLWT is expected to reinvest a constant fraction of earnings in the business at a constant return on equity ROE of 15 percent. Assuming that on March 22, 2018 (one year prior to the first dividend payment) the stock of MLWT is expected to sell at a forward- looking price to earnings ratio of 12.5, determine:

a. the long-run earnings growth rate for MLWT

b. the current (date 0) share price for MLWT

c. the current (date 0) share price for MLWT

Reference no: EM13197550

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