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tp ./ www.matnx.com/ Stu dent/ Player lest.aspx?testid = 166 / /4284&centervin-yes; FIN331-Financial Management Fall 2017, WB2l Kouame&11 Test: Mid-Term Exam 2 Time Remaining: 02:25:36 Submit Test This Question: 4 pts 24 of 25 (0 complete) ·> This Test: 100 pts possible Shackleford Corporation net income this year is $800,000. The company generally retains 35% of net income for reinvestment The company's common equity currently has a book value of $5,000,000. They just paid a dividend of $1.37, and the required rate of return on this stock is 12% Compute the value of this stock if dividends are expected to continue growing indefinitely at the company's internal growth rate. OA. $435 OB. $15.63 O C. $22.61 O D. $11.42 Subn Click to select your answer pdf ". Invitation to identify,pdf o search

Explanation / Answer

return on equity=800000/5000000=16%

growth rate=retention ratio*return on equity

=35%*16%=5.60%

value of the stock=(1.37*(1+5.6%))/(12%-5.60%)

=22.61

the above is the answer

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