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Question: Calculation of g and EPS

Sidman Products' common stock currently sells for $66 a share. The firm is expected to earn $5.94 per share this year and to pay a year-end dividend of $3.70, and it finances only with common equity.

If investors require a 9% return, what is the expected growth rate? Round your answer to two decimal places. Do not round your intermediate calculations.

If Sidman reinvests retained earnings in projects whose average return is equal to the stock's expected rate of return, what will be next year's EPS? (Hint: g = (1 - Payout rate)(ROE).) Round your answer to the nearest cent. Do not round your intermediate calculations.

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Category:- Basic Finance
Reference No.:- M93039939

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