Earnings growth comes from investment of retained earning

Assignment Help Financial Management
Reference no: EM131541414

Halliford Corporation expects to have earnings this coming year of $ 2.678 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 45 % of its earnings. It will retain 18 % of its earnings from that point onward. Each? year, retained earnings will be invested in new projects with an expected return of 19.8 % 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 10.9 %, what price would you estimate for Halliford? stock?

The stock price will be ?$___ .?(Round to the nearest? cent.)

Reference no: EM131541414

Questions Cloud

How many month will take her to pay off her credit card debt : If Claire makes monthly payments of 75$. Approximately how many months will take her to pay off her credit card debt?
French firm represents one share of that firm stock : A share of the ADR of a French firm represents one share of that firm’s stock that is traded on the Paris stock exchange.
The fixed asset will be depreciated straight-line to zero : The fixed asset will be depreciated straight-line to zero over its 4-year tax life, after which time it will be worthless.
One common method to determine the discount rate : One common method to determine the discount rate, or rate of return that investors require, is the build-up method.
Earnings growth comes from investment of retained earning : Assume? Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings.
Type of valuation may be susceptible to psychological effect : some of the assumptions used in selecting both the method or type of valuation may be susceptible to psychological effects.
Forward rate is used as a forecast : Assume that interest rate parity holds. What is the approximate 10-year forecast of the peso’s spot rate if the 10-year forward rate is used as a forecast?
Sensitivity of the ocf to changes in quantity sold : Calculate the sensitivity of the OCF to changes in the quantity sold.
When projecting growing cash flows into perpetuity : When projecting growing cash flows into perpetuity,

Reviews

Write a Review

Financial Management Questions & Answers

  Amortized over its useful life or over statuatory period

Matt operates a sole proprietorship and files his return on a calendar year basis. He took out a fire insurance policy for his business effective July 1, year 1, and paid a premium of 3,600 for 4 years. Matt reports his income and expenses on a cash ..

  Investment horizon has no bearing on current stock price

Show numerically that investment horizon has no bearing on current stock price.

  Average rates of return on treasury bills-government bonds

Top hedge fund manager Diana Sauros believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $59. The stock will pay a dividend at year-end of $4.00. Assume that risk-free Treasury securities currently offer ..

  Which gives it a yield to maturity

A bond currently sells for $1,000, which gives it a yield to maturity of 5%. Suppose that if the yield increases by 20 basis points, the price of the bond falls to $975. What is the duration of this bond?

  Split has no effect on the total market value of equity

What will be the company's stock price following the stock split assuming that the split has no effect on the total market value of JPix's equity?

  Actual real differ from expected real interest rate

Would this possible difference be of more concern to you if you were considering making a loan to be paid back in 1 year or a loan to be paid back in 10 years?

  The liquidity premium on the corporate bond

A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond?

  Price would you be willing to pay for share of acap stock

What price would you be willing to pay for a share of Acap stock today, if you planned to hold the stock for two years?

  Explain why the expansion of sears

Explain why the expansion of Sears, Roebuck & Co. into the financial services industry fails. Explain how the acquisition of NCR by AT&T is value-destructing.

  What is the bond''s nominal annual yield to call

What is the bond's nominal annual yield to maturity (YTM)? What is the bond's nominal annual yield to call (YTC)?

  What is the net present value of project

What is the payback period for the project? What is the net present value of the project ?

  Negotiating a deal to purchase a fitness center

You are negotiating a deal to purchase a fitness center. You feel that the best way to value a firm is using yearly profits. The current owners want $1 million for the center. They let you take a look at their financial information, and you see that ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd