Problem1spencer suppliess stock is currently selling for 60, Ask an Expert

Accounting

Problem:1

Spencer Supplies's stock is currently selling for $60 a share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $3.60.

Required:

Question 1: If investors require a 9% return, what rate of growth must be expected for Spencer?

Question 2: If Spencer reinvests earnings in projects with average returns equal to the stock's expected rate of return, then what will be next year's EPS?

Note: Please show how to work it out.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167984

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