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Company Q's current return on equity (ROE) is 12%. It pays out 40 percent of earnings as cash dividends (payout ratio =0.40 ). Current book
Company Q's current return on equity (ROE) is 12%. It pays out 40 percent of earnings as cash dividends (payout ratio =0.40 ). Current book value per share is $69. 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 10.5% and the payout ratio increases to 0.70 . The cost of equity is 10.5%. a. What are Q's EPS and dividends in years 1, 2, 3, 4, and 5 ? b. What is Q's stock worth per share? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. What are Q's EPS and dividends in years 1, 2, 3, 4, and 5? Note: Do not round intermediate calculations. Round your answers to 2 decimal places
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