What is the equilibrium price of the stock

Reference no: EM13262473

Suppose that the consensus forecast of security analysts of your favorite company is that earnings next year will be E1 = $5:00 per share. Suppose that the company tends to plow back 50% of its earnings and pay the rest as dividends. If the Chief Financial Officer (CFO) estimates that the company's growth rate will be 8% from now onwards, answer the following questions.

If your estimate of the company's required rate of return on its stock is 10%, what is the equilibrium price of the stock?

Reference no: EM13262473

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