An analyst has gathered the following data for Webco, Inc:
Retention = 40%
ROE = 25%
k = 14%
Using the infinite period, or constant growth, dividend discount model, calculate the price of Webco's stock assuming that next years earnings will be $4.25.
A) $63.75.
B) $55.00.
C) $125.00.
Answer: A
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