Earnings growth comes from investment of retained earning

Assignment Help Financial Management

Reference no: EM131332146

Halliford Corporation expects to have earnings this coming year of $2.713 per share. Halliford plans to retain all of its earnings for the next two years.? Then, for the subsequent two? years, the firm will retain 50% of its earnings. It will retain 20% of its earnings from that point onward. Each? year, retained earnings will be invested in new projects with an expected return of 26.4% per year. Any earnings that are not retained will be paid out as dividends. Assume? Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If? Halliford's equity cost of capital is 11.1%?, what price would you estimate for Halliford? stock? ?(Note: Be careful not to round any intermediate steps less than three decimal? places.)

Reference no: EM131332146

Questions Cloud

Tenant owe the landlord in expense : A tenant has a gross lease with an ‘‘expense stop''of $2.75/SF. If the building has 200,000 square feet of leasable space, reimbursable operating expenses of $700,000, and the tenant rents 25,000 SF, then how much does the tenant owe the landlord ..

What is maximum initial cost the company : Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.8 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. What is the maximum initial cost the com..

After-tax cash flow from the sale : Consider the following values. NOIn+1: $2.8 million. Cap rate: 7.5%. Brokerage commission: 3%. Remaining mortgage balance: $12 million. Remaining book value: $14 million. Total depreciation taken: $4.9 million. Recapture tax (for depreciation take..

Share of stock has a dividend : A share of stock has a dividend of D0 =$5. The dividend is expected to grow at a 20 percent annual rate for the next 3 years, and then at a long- run normal growth rate of 5 percent forever. If investors require a 10 percent return on this stock, wha..

Earnings growth comes from investment of retained earning : Halliford Corporation expects to have earnings this coming year of $2.713 per share. Halliford plans to retain all of its earnings for the next two years.? Then, for the subsequent two? years, the firm will retain 50% of its earnings. Assume? Hallifo..

History and structure of today aviation industry : Describe a broad overview of the history and structure of today's aviation industry. This overview will include knowledge of several of the world's major airlines and airports, the importance of air transport to the world economy

Nominal net cash flow : However, because of the competition from the plastic alternatives, it sees no scope for increasing the price per unit from its current level of $42. Based on these forecasts, the nominal net cash flow, four years from now, is forecast to be closes..

Possible investment is the packaging machine : The first possible investment is the packaging machine, which will cost $14,000. The second investment, the molding machine, would cost $12,000. The expected cash flows for the two projects are given below and the cost of capital to the firm is 15..

Why the materials are important in financial decision making : Pick one material and Explain "why the materials (List below) are important in financial decision making." Support your discussion with a example.

User Account

All Pages