What is the value of the company stock

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A company is the producer of nutrition for babies. The company is expected to earn $ 20 per share at the end of the coming year. In the next three years the firm is planning to retain 80 % of its earnings, then after, the firm expects to retain only 15 % of its earnings indefinitely. According to the information you received, each year's retained earnings will be invested in new projects with an epected annual return of 12 %. The earnings, which are not retained, will be distributed to shareholders.

Required: What is the value of the company's stock if the firm's equity cost of capital is 12%?

Reference no: EM132596594

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