Secure httpswwwmathxlcomStudentPlayerHomeworkaspxhomeworkld

Secure | https://www.mathxl.com/Student/PlayerHomework.aspx?homeworkld-4 MBA 579 (Summer 2018) Homework: Chapter 10 Save Homework Score: 0 of 2 pts 2 of 6 (0 complete) Y P10-4 (similar to) HW Score: 0%, 0 Question Help (Common stock valuation) Giliand Motor, Inc., paid a $3.89 dividend last year. If Gilliland\'s return on equity is 35 percent, and its retention rate is 28 percent, what is the value of the common stock if the investors require a rate of return of 18 percent? The value of the common stock is S(Round to the nearest cent ) nter your answer in the answer box and then click Check Answer All parts showing

Solution

growth rate = 0.28 * 35% = 9.80%

the value of common stock = 3.89 * 1.098/(0.18 - 0.098)

the value of common stock = 52.09