Benchmark Metrics Inc.? (BMI), an? all-equity financed? firm, reported EPS of $5.77 in 2013. Despite the economic? downturn, BMI is confident regarding its current investment opportunities. But due to the financial? crisis, BMI does not wish to fund these investments externally. The Board has therefore decided to suspend its stock repurchase plan and cut its dividend to $1.26 per share? (vs. almost $2 per share in? 2012), and retain these funds instead. The firm has just paid the 2013? dividend, and BMI plans to keep its dividend at $1.26 per share in 2014 as well. In subsequent? years, it expects its growth opportunities to? slow, and it will still be able to fund its growth internally with a target 45% dividend payout? ratio, and reinitiating its stock repurchase plan for a total payout rate of 58%. ?(All dividends and repurchases occur at the end of each? year.)

Suppose? BMI's existing operations will continue to generate the current level of earnings per share in the future. Assume further that the return on new investment is 15%?, and that reinvestments will account for all future earnings growth? (if any).? Finally, assume? BMI's equity cost of capital is 10%.

a. Estimate? BMI's EPS in 2014 and 2015? (before any share? repurchases).

b. What is the value of a share of BMI at the start of 2014? (end of? 2013)?

Hint?: Make sure to round all intermediate calculations to at least four decimal places and show your work.