Question: Exercise #3 (6 points) Company CBA projects an earning per share of $2. Management plans to plowback 40 percent of all earnings into the

Exercise #3 (6 points) Company CBA projects an earning per share of

Exercise #3 (6 points) Company CBA projects an earning per share of $2. Management plans to plowback 40 percent of all earnings into the firm for new investment, and if they do so, the value of the stock today is $30 per share. Assume the investors expect a 10 percent return on the stock. What is the rate of return on new investment for the company?

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