Question: 2 . Will - O - Wind Airlines always invests ( in non - depreciating assets ) 20 % of its earnings , which will

2 . Will - O - Wind Airlines always invests ( in non - depreciating assets ) 20 % of its earnings , which will be next period ( Period 1) $3 per share . The rest it pays out as dividends . It's investment opportunities currently earn ( and are expected to earn in the indefinite future ) 18% . There are no taxes . The risk adjusted required rate of return on this stock is 10% . What is its price ? P =. Div , ( 1 - 6 ) E , 7 - 6 XR 5 - 6 XR P =. ( 1 - 0. 8 ) * 3 0 . 10 - 0. 2 X 0 . 18 = $37.5

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