Question: An analyst develops the following information to value a common stock. Last year's earnings per share = $4.00 Risk-free rate = 9% Return on equity

An analyst develops the following information to value a common stock.

  • Last year's earnings per share = $4.00
  • Risk-free rate = 9%
  • Return on equity (ROE), expected to remain constant in the future= 10%
  • Dividend payout, expected to remain stable in the future = 30%
  • Stock's beta = 1.4
  • Expected market return = 14%

What should the stock price be today?

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