Question
Company Qs current return on equity (ROE) is 13%. It pays out 45 percent of earnings as cash dividends (payout ratio = 0.45). Current book
Company Qs 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 $68. 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 0.90. The cost of capital is 11.0%. a. What are Qs EPS and dividends in years 1, 2, 3, 4, and 5? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Please help solve. There are some answers with explanation but the it's still incorrect.
Year EPS Dividends 1 | 2 2 3 4 ) 5Step by Step Solution
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