Question: The Bouchard Company's EPS was $6.50 in 2012, up from $4.42 in 2007. The company pays out 40% of its earnings as dividends, and its

The Bouchard Company's EPS was $6.50 in 2012, up from $4.42 in 2007. 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. (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, r_s?

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