You Expect That Bean Enterprises Will Have Earnings Per Share

question 17

Multiple Choice

You expect that Bean Enterprises will have earnings per share of $2 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