Answer:
$557,000
Step-by-step explanation:
Note: Missing word is attached as picture below
Retention Ratio = (Net Income - Dividends) / Net Income
Retention Ratio = (12500 - 3000) / 12500
Retention Ratio = 9500 / 12500
Retention Ratio = 0.76
Retention Ratio = 76%
Sustainable equity growth rate = Retention Ratio * Return on Equity
Sustainable equity growth rate = 76% * 15%
Sustainable equity growth rate = 11.40%
Expected dividend per share = Current Year Dividend *(100 + Growth Rate)%
Expected dividend per share = 3000 * (100+11.4)%
Expected dividend per share = 3000 * 111.4%
Expected dividend per share = 3342
Value of Stock = Expected dividend per share / (Cost of capital equity - Dividend growth rate)
Value of Stock = 3342 / (12% - 11.40%)
Value of Stock = $557,000