Company qrsquos current return on equity roe is 13 the firm, Ask an Expert

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Company Q’s current return on equity (ROE) is 13%. The firm pays out 45 percent of its earnings as cash dividends. (payout ratio = .45). Current book value per share is $53. 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 11.0% and the payout ratio increases to .70. The cost of capital is 11.0%.

a. What are Q’s EPS and dividends in years 1, 2, 3, 4, and 5? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93057181

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