Problem:
Yakey Corporation's ROE is 14%. Their dividend payout ratio is 40%. The last dividend, just paid, was $2.58. If dividends are expected to grow by the company's sustainable growth rate indefinitely,
Required:
What is the current value of Yakey common stock if its required return is 18%?
a) $26.87
b) $21.97
c) $29.13
d) $20.81
Note: Show all workings.