Question: Company Q's current return on equity (ROE) is 20%. It pays out 45 percent of earnings as cash dividends (payout ratio = 0.45). Current book

Company Q's current return on equity (ROE) is 20%. It pays out 45 percent of earnings as cash dividends (payout ratio = 0.45). Current book value per share is $56. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stay constant for the next two years. After that, competition forces ROE down to 10.0% and the payout ratio increases to 0.80. The cost of capital is 11.0%. Question: What is Q's stock worth per share? 106.1 121.7 111.6 118.2 74.9

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