Question: The Bouchard Companys EPS was $6.50 in 2008, up from $4.42 in 2003. The company pays out 40% of its earnings as dividends, and its

The Bouchard Company’s EPS was $6.50 in 2008, up from $4.42 in 2003. The company pays out 40% of its earnings as dividends, and its common stock sells for $36.00.

a. Calculate the past growth rate in earnings. (Hint: This is a 5-year growth period.)

b. The last dividend was D0 = 0.4($6.50) = $2.60. Calculate the next expected dividend, D1, assuming that the past growth rate continues.

c. What is Bouchard’s cost of retained earnings, rs?

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