Im taking a corporate finance class at NYU and I cant for the life of me solve this problem. Keep in mind I am an accounting guru and have little valutaion experience. Need some help! I am at my wits end with this question. I think I am right but it doesnt make sense to me. Some help would be truly appreciated!
The Hedda Company has current earnings of $2.00 per share. The company plans to reinvest 30% of its annual earnings. Hedda’s cost of capital is 10% and stock price is currently $20.
a. What is Hedda’s return on retained earnings?
b. What is the value of Hedda’s growth opportunities?
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