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johnpaech johnpaech
wrote...
Posts: 1098
Rep: 7 0
6 years ago
Wyatt's current stock price is closest to:
A) $51.23
B) $54.00
C) $49.11
D) $61.38
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
Read 59 times
1 Reply

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wrote...
6 years ago
C
Explanation:  C) Retention ratioYear 1 =   = .75 × 16% return = 12% growth rate
EPSYear 1 = $4.00 (1.12) = $4.48
Retention ratioYear 2 =   = .776786 × 16% return = 12.4286% growth rate
EPSYear 2 = $4.48 (1.124286) = $5.0368
Retention ratioYear 3 = .40% × 16% return = 6.4% growth rate
P0 =   +   = $49.11
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