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Company Q's current return on equity (ROE) is 13%. It pays out 45 percent of earnings as cash dividends (payout ratio = 0.45). Current book
Company Q's current return on equity (ROE) is 13%. It pays out 45 percent of earnings as cash dividends (payout ratio = 0.45). 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 0.75. 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.) Year EPS Dividends 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.)
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