Bill's Bakery expects earnings per share of $2.56 next year. Current book value is $4.70per share. The appropriate discount rate for Bill's Bakery is 11 percent. Calculate the share price for Bill's Bakery if earnings grow at 3 percent forever.
P0= $4.70 + [$2.56-($4.70 x 0.11)]/ (.11-0.03) =$30.24