You Expect That Bean Enterprises Will Have Earnings Per Share

question 90

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
• E)$37.50

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Definitions:

Independent Variables

Variables in a statistical model that are manipulated or changed to observe their effect on dependent variables.

Coefficient of Determination

A measure used in statistical modeling that indicates how well data points fit a line or curve. It is represented as a value between 0 and 1.

Dependent Variable

A variable in statistical modeling whose value is influenced by other variables.

Independent Variable

The variable in an experiment that is manipulated or changed to explore its effects on the dependent variable.