Question: Unless stated otherwise, interest is compounded annually, and payments occur at the end of the period. Face value for bonds is $1000. 6. (10) Ginger

Unless stated otherwise, interest is compounded annually, and payments occur at the end of the period. Face value for bonds is $1000.

6. (10) Ginger Energy expects to have earnings per share (EPS) of $1.15 next year. They have a retention rate of 26% and their return on equity (ROE) is 15%.

a. If the investors required return (cost of capital) is 7.9%, find the current stock price.

b. Is Ginger Energy reinvesting their money wisely (are they increasing shareholder wealth with their project selection)? Explain.

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