Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Calculation of gL and EPS

Spencer Supplies' stock is currently selling for $60 a share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $1.80.

 

  1. If investors require a 9% return, what rate of growth must be expected for Spencer? Round your answer to the nearest whole number.

      %

  2. If Spencer reinvests earnings in projects with average returns equal to the stock's expected rate of return, then what will be next year's EPS? (Hint: gL = ROE × Retention ratio.) Do not round intermediate calculations. Round your answer to the nearest cent.

    $  

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