Company Q$\text{'}$s current return on equity $($ROE$)$ is $14\%.$ It pays out one$-$half of earnings as

cash dividends $($payout ratio $=\mathrm{.}5).$ Current book value per share is $$50.$ 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 $11\mathrm{.}5\%$ and the payout ratio increases to $0\mathrm{.}8.$ The cost of

capital is $11\mathrm{.}5\%.$

a$.$ What are Q$\text{'}$s EPS and dividends next year? How will EPS and dividends grow in years

$2,3,4,5,$ and subsequent years?

b$.$ What is Q$\text{'}$s stock worth per share? How does that value depend on the payout ratio and

growth rate after year $4?$

DO NOT PROVIDE EXCEL SOLUTION. FOCUS ON SECOND PART PLEASE