Question: The Shrieves Company s most recent EPS was 6 50 EPS was

The Shrieves Company’s most recent EPS was $6.50; EPS was $4.42 five years ago. The company pays out 40 percent of its earnings as dividends, and the stock sells for $36.
a. Calculate the past growth rate in earnings.
b. Calculate the next expected dividend per share, D1. (D0 = 0.4($6.50) = $2.60.) Assume that the past growth rate will continue.
c. What is the cost of retained earnings, rs, for the Shrieves Company?

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