Question: Example: MJ company forecasts to pay a $2.50 dividend next year, which represents 100% of its earnings. This will provide investors with a 15% expected

Example: MJ company forecasts to pay a $2.50 dividend next year,

Example: MJ company forecasts to pay a $2.50 dividend next year, which represents 100% of its earnings. This will provide investors with a 15% expected return. What if instead, MJ Company decides to plow back 40% of the earnings at the firm's current return on equity of 25%. Calculate the value of the stock before and after the plowback decision. Given: D1 = $2.50 r = 15% Return on equity (ROE) = 25%

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