Halliford Corporation expects to have earnings this coming year of $ 2.84 per share. Halliford plans...

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Halliford Corporation expects to have earnings this coming yearof $ 2.84 per share. Halliford plans to retain all of its earningsfor the next two years.? Then, for the subsequent two? years, thefirm will retain 46 % of its earnings. It will retain 17 % of itsearnings from that point onward. Each? year, retained earnings willbe invested in new projects with an expected return of 20.62 % peryear. Any earnings that are not retained will be paid out asdividends. Assume? Halliford's share count remains constant and allearnings growth comes from the investment of retained earnings. If?Halliford's equity cost of capital is 8.1 %?, what price would youestimate for Halliford? stock?
NB: Kindly mention the excel formulae separately if solving onexcel.

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4.3 Ratings (1056 Votes)

Given Expected Rate of Return 2062 Cost of Capital 810 Calculated Growth rate after 5 Year g g ROE Retention Rate g 2062 017 351 Year 0 1 2 3 4 5 Earnings 284 343 413 452 495 Retention Ratio Given 1 1 046 046 017 Retained Earning Earnings Retention Ratio 284 343 190 208 084 See Answer

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