What should be its stock price

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You expect that Bean Enterprises will have earnings per share of $3 for the coming year (i.e., year 1). Bean plans to retain 80% of earnings in years 1-2. In years 3, 4 and 5, Bean will retain 60% of earnings. After that, it will retain 30% of its earnings from year 6 forward. Retained earnings will be invested in projects with an expected return of 18% per year. If Bean's equity cost of capital is 12%, what should be its stock price?

Reference no: EM132345775

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