Question: Compnay Q's current ROE... Company Q's current return on equity ROE is 16%. The firm pays out 60 percent of its earings as cash dividends

Compnay Q's current ROE... Compnay Q's current ROE... Company Q's current return on equity ROE is

Company Q's current return on equity ROE is 16%. The firm pays out 60 percent of its earings as cash dividends payout ratio- 60 Current book value per share is $57. 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 12.5% and the payout ratio increases to .70. The cost of capital is 12.5%. a. What are Q's EPS and dividends in years 1, 2, 3,4, and 5? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year EPS $ 11.41 S 12.14 S12.91 $13.74 S 14.17 Dividends $6.85 8 $ 7,28 $7.75 0 $ 8.24 8 $20.62 b. What is Q's stock worth per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock worth per share $40.75

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