Question
8.value: 10.00 points Company Q's current return on equity (ROE) is 13%. The firm pays out 45 percent of its earnings as cash dividends. (payout
8.value:
10.00 points
Company Q's current return on equity (ROE) is 13%. The firm pays out 45 percent of its earnings as cash dividends. (payout ratio = .45). Current book value per share is $63. Book value per share will grow as Q reinvests earnings.
Assume that the ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 11.0% and the payout ratio increases to .75. The cost of capital is 11.0%.
a. What are Q's EPS and dividends in years 1, 2, 3, 4, and 5? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
YearEPSDividends
1$$
2$$
3$$
4$$
5$$
b. What is Q's stock worth per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Stock worth per share$
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