Laurel enterprises expects earnings next year of $3.68 per share and has a 30 % retention rate, which it plans to keep constant. its equity cost of capital is 9 %, which is also its expected return on new investment. its earnings are expected to grow forever at a rate of 2.7 % per year. if its next dividend is due in one year, what do you estimate the firm's current stock price to be?

So the firm's current stock price will be $40.88

Explanation:

We have given that Enterprises expected earnings next year is $3.68

So EPS next year = $3.68

Retention rate is given as 40%

Dividend payout ratio = 100 - 40 = 60 %

Dividend paid next year = $3.68×0.6 = $2.208

We know that price of the stock =

So the firm's current stock price will be $40.88

answer; /// the above statement is (true);