You expect that Bean Enterprises will have earnings per share of $3 for the coming year. Bean plans to retain all of its earnings for the next three years. For the subsequent two years, the firm plans on retaining 50% of its earnings. It will then retain only 25% of its earnings from that point forward. Retained earnings will be invested in projects with an expected return of 20% per year. If Bean's equity cost of capital is 12%, then the price of a share of Bean's stock is closest to:

A) $17.00

B) $10.75

C) $27.75

D) $43.50

Answer rating: 100% (QA)

Years Earnings Dividends g 1 2 0 20 2 240 0 20 3 288 0 20 4 346 173 10 5 380 ... View the full answer