BA350 Financial Management: 10-12 Spencer Supplies’ stock is currently selling

BA350 Financial Management

10-12 Calculation of g 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 $3.60.
a. If investors require a 9% return, what rate of growth must be expected for Spencer?
b. If Spencer reinvests earnings in projects with average returns equal to the stock’s expected rate of return, what will be next year’s EPS? [Hint: g _ROE(Retention ratio).]
Powered by