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What rate of return do Nogro investors require

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Question - The stock of Nogro Corporation is currently selling for $22 per share. Earnings per share in the coming year are expected to be $3.20. The company has a policy of paying out 60% 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. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro's investors require?

Reference no: EM132929555

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