Mercury Satellite Corporation earned $20 million for the fiscal year ending yesterday.The firm's policy is to pay out 30 percent of its earnings as dividends. The remaining 70percent of earnings is retained by the company for use in projects. The company has 2million shares of common stock outstanding. The current stock price is $90. Thehistorical return on equity (ROE) of 15 percent is expected to continue in the future. Whatis the required rate of return on the stock? (Do not round intermediate calculationsand enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Earnings = $20,000,000Share outstanding = 2,000,000Payout ratio = 30%Current stock price = $90ROE =…

Answered: Mercury Satellite Corporation earned…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 4P

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