You expect that Bean Enterprises will have earnings per share of $2 for the coming year. Bean plans to retain all of its earnings for the next three years. For the subsequent two years, the firm plans on retaining 50% of its earnings. It will then retain only 25% of its earnings from that point forward. Retained earnings will be invested in projects within an expected return of 20% per year. If Bean's equity cost of capital is 10%, then the price of a share of Bean's stock is closest to ---- Solution Hint: Step 1: Calculate EPS. See the figure below. Step 2: Calculate Dividend per share. See the figure below. Step 3: Share price today Dido Div4 Dius P= + (E-3) + (1+re) (1+r) (1+re) Dividend Payout Dividend Payout Rate = 75%. Dividend Payout Rate=0%. Rate = 50%. EPS growth rate (g) = 25% x 20% = EPS growth rate (g) = 100%x. EPS growth rate (g) 5% 20% = 20% = 50% x 20% = 10% Divo- Div = Diver Div, - Dive= Divs- EPS EPS, EPS, EPS, EPS, X 75% 75% 75% 75% Div = EPS, EPS, X EPS, X EPS, 50% 0% 50% 0% EPS,= EPS, - EPS,= EPS10 = 0% EPS = EPS = $2x1.23 S2x1.23 $2x1.23 $2x1.23 EPS,= EPS,= EPS,= $2x1.23 $2x1.23 x112 x1.12 x1.12 EPS, = x1.12 $2 S2x1.2 S2x1.22 $2x1.23 xl.l x1.12 x1.05 x1.052 1.053 x1,054 Div4 EPS75% Div,= Div, Today 1 2 3 4 5 6 7 9 8 10 O $24.82 $16.54 O $41.36 O $66.18