The common stock of ABS Corporation is currently selling for $40 per share. It is expected that Omega will pay a dividend equal to $3.75 per share this year, (D-HAT 1). In addition, analysts have indicated that the company has been growing at a constant rate of 3 percent, and this growth is expected to continue forever.
What is ABS’s cost of retained earnings this year?
What is the expected price of this stock next year?
What would be the cost of retained earnings one year from now?