Stock price

India
November 10, 2009 9:08am CST
halliford corporation expects to have earnings this coming year of $3per share. halliford plans to retains all of its earnings for the next 2 years. for the subsequent two years, the firm will retain 50% of its earnings. It will then retain 20% of its earning from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 25% per year. any earnings that are retained will be paid out as dividends. assume hallifords share count remains constant and all earnings growth comes from the investment of retained earnings. If hallifords equity cost of capital is 10% what price would you estimate for halliford stock?
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