Spencer Supplies 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 a If investors require a 9 return, what rate of growth must be expected for Spencer b If Spencer reinvests earnings in projects with average ret...

a b Current EPS 5400 Less Dividends per share 3600 R ...

Spencer Supplies stock is currently selling for $60 a share. The firm is expected to earn $5.40

Question:

Spencer Supplies’ 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 of $3.60.
a. If investors require a 9% return, what rate of growth must be expected for Spencer?
b. 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?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...