Weis, Corp. is expected to generate an earnings per share of $6 next year, with a...

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Weis, Corp. is expected to generate an earnings per share of $6 next year, with a...

Weis, Corp. is expected to generate an earnings per share of $6 next year, with a return on equity of 18%. And investors require a return of 14%. What should be Weis's common stock's intrinsic value if the company plows back 70% of its earnings each year?

$150
$69.77
$128.57
$20.93

business finance

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Answer 1

Answer #1

Cost of equity=ke = [0.18*0.7] 14.00% 12.60% $1.80 $128.57 1.80/(14%-12.60%) (ROE x retention ratio) (6*0.3) D1 = Price = 01/

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