Earnings were paid as dividends and nothing were reinvested

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Reference no: EM13731378

The stock of Nogro Corporation is currently selling for $10 per share. Earnings per share in the coming year are expected to be $2. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinitely.

a. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested?

GO = ?

Reference no: EM13731378

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