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Need help solving a and b!!!! Company Q's current return on equity (ROE) is 15%. The firm pays out 55 percent of its earnings as
Need help solving a and b!!!!
Company Q's current return on equity (ROE) is 15%. The firm pays out 55 percent of its earnings as cash dividends. (payout ratio.55). Current book value per share is $66. 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 12.0% and the payout ratio increases to .80. The cost of capital is 12.0%. 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 2 4 b. What is Q's stock worth per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock worth per shareStep by Step Solution
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