solution
solution.
AFC’s stock will generate carnings of S4 per share this year. The discount rate for the stock is 4 percent and the rate of return on reinvested caming is 8%
a. Find the growth rate of dividends and the price of the stock if the company retains 40% earnings. Growth rate: Price/Share:
b. What is the present value of growth opportunities if the company retains 40%? PVGO =
c. What is the price of the stock one year afterwards if the company retains 40%? PI= d. What is the dividend yield and capital gain yield if the company retains 40% earnings? Assuming you sell the stock one year afterwards.
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