Q2. Justin Cement Company has had the following pattern of earnings per share
over the last five years:
Year Earnings per Share
2006
$4.00
2007
4.20
2008
4.41
2009
4.63
2010
4.86
ML
IN
THEMEN
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The earnings per share have grown at a constant rate (on a rounded basis) and will
continue to do so in the future. Dividends represent 40 percent of earnings. Project
earnings and dividends for the next year (2011).
If the required rate of return (Ke) is 13 percent, what is the anticipated stock price (PO)
at the beginning of 2011?
(10
marks)
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Answer:
Earnings = 18.232 billion - 1.614 billion = 16.618 billion (net profit)
EPS = 16.618 billion ÷ 10.196 billion = ~$1.63
Explanation:
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