year 80 4. Question 18, page 124 (Hint: To avoid any discrepancy in your understanding of current year", the following table has been produced. In part (b), don't be surprised if you find the stock value is independent of the payout ratio and growth rate after year 4. But can you explain why? intuitively and/or mathematically?) 1 2 3 | Book equity per share ($) 50.00 Earnings per share ($) Return on equity (%) 11.5 11.5 Payout ratio (%) 50 50 50 50 80 Dividends per share ($) Growth rate of dividends (0) 18. Company O's current return on equity (ROE) is 14%. It pays out one-half of earning as cash dividends (payout ratio = .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 11.5% and the payout ratio increases to 0.8. The cost of capital is 11.5%. a. What are Q'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's stock worth per share? How does that value depend on the payout ratio and growth rate after year 4