Task:
In each of the following situations assume a zero-growth rate for earnings and dividends (NPVGO is zero), that all earnings are paid out as dividends, and that the earnings-based valuation model is being used.
Question 1. Dennison Corporation's earnings are expected to be $7.00 per share and its stock price is $28.00. What is the required rate of return on the firm's equity?
Question 2. Sampson Corporation's ernings are expected to be $5.00 per share and its required rate of return on equity is 22%. What is the current price of the stock?
Question 3. Johnson Corporation's current stock price is $40.00 and its required rate of return on equity is 15%. What is the firm's expected earnings?