# Stock Price

1. a. Big Chair Corporation has an ROE of 16% and a plowback ratio of 50%. If the coming year's earnings are expected to be $2 per share, at what price will the stock sell? The market capitalization rate is 12%.

1. b. What price do you expect Big Chair Corporation shares to sell for in 3 years?

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#### Solution Preview

1. a. Big Chair Corporation has an ROE of 16% and a plowback ratio of 50%. If the coming year's earnings are expected to be $2 per share, at what price will the stock sell? The market capitalization rate is 12%.

growth rate of dividends/earnings=g= plowback ratio x ROE= 50% x ...

#### Solution Summary

Current Stock Price and stock price in 3 years have been calculated, given ROE, plowback ratio and the market capitalization rate.

$2.19