Question

The bouchard company's eps was $6.50 in 2001 and $4.42 in 1996. The company pays out 40 percent of its earnings as dividends, and the stock sells for $36.

a. Calculate the past growth rate in earnings. (hint: this is a 5-year growth period.)

b. Calculate the next expected dividend per share, d 1 . (d 0 ? 0.4($6.50) ? $2.60.) as- sume that the past growth rate will continue.

c. What is the cost of retained earnings, k s , for the bouchard company?

Answer 1

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