Question: This question and the next three questions are based on the following situation. The earnings per share (EPS) of BioSciences Ltd. in Year 0 is
This question and the next three questions are based on the following situation.
The earnings per share (EPS) of BioSciences Ltd. in Year 0 is 5.2. BioSciences is not expected to pays any cash dividends during Year 0 to Year 5 (both inclusive), and is expected to reinvest all its earnings during these years. The firm's expected ROE for investments made during Year 0 to Year 5 is 17.1% per year.
The firm's ROE on new investments made in year 5 or later is expected to fall to 11.7% per year. The expected return on the equity of BioSciences is also 11.7% per year. Therefore, the firm do not intend to retain any profits from Year 6 onward.
What is the annual growth rate of earnings of BioSciences Ltd. up to Year 6 in percent? Recall that the investment in year n determines the growth in earnings from year n to year n+1.
Enter the percentage as a number with or without the % sign (For example, enter eight percent either as 8 or as 8% but not as 0.08)
In the above situation of BioSciences Ltd., what is the expected earnings per share in Year 6?
In the BioSciences Ltd. situation , what is the expected price of the share in year 5?
In the BioSciences Ltd. situation of the previous questions, what is the expected price of the share now (Year 0)?
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