Company Q's current return on equity (ROE) is 16%. It pays out 60 percent of earnings as cash dividends (payout ratio -0.60) Current book value per share is $52. 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 12.5% and the payout ratio increases to 0.90. The cost of equity is 12.5%. a. What are Q's EPS and dividends in years 1, 2, 3, 4, and 57 b. What is s stock worth per share? Complete this question by entering your answers in the tabs below. Required A Required What are Q's EPS and dividends in years 1, 2, 3, 4, and 5? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Year 1 2 3 4 5 EPS Dividends
Company Q's current return on equity (ROE) is 16%. It pays out 60 percent of earnings as cash dividends (payout ratio -0.60) Current book value per share is $52. 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 12.5% and the payout ratio increases to 0.90. The cost of equity is 12.5%. a. What are Q's EPS and dividends in years 1, 2, 3, 4, and 57 b. What is s stock worth per share? Complete this question by entering your answers in the tabs below. Required A Required What are Q's EPS and dividends in years 1, 2, 3, 4, and 5? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Year 1 2 3 4 5 EPS Dividends
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Company Q's current return on equity (ROE) is 16%. It pays out 60 percent of earnings as cash dividends (payout ratio-0.50) Current
book value per share is $52. 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 12.5% and the
payout ratio increases to 0.90. The cost of equity is 12.5%.
a. What are Q's EPS and dividends in years 1, 2, 3, 4, and 5?
b. What is s stock worth per share?
Complete this question by entering your answers in the tabs below.
Required A Required
What are Q's EPS and dividends in years 1, 2, 3, 4, and 5?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Year
1
2
3
4
5
EPS
Dividends
Transcribed Image Text:.
ces
Company Q's current return on equity (ROE) is 16 %. It pays out 60 percent of earnings as cash dividends (payout ratio=0.60). Current
book value per share is $52. 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 12.5% and the
payout ratio increases to 0.90. The cost of equity is 12.5%.
a. What are Q's EPS and dividends in years 1, 2, 3, 4, and 5?
b. What is Q's stock worth per share?
Complete this question by entering your answers in the tabs below.
Required A Required B
What is Q's stock worth per share?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Stock worth per share
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