If the required rate of return is 13 percent what is the

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Reference no: EM131178513

Problem:

Justin Cement Company has had the following pattern of earnings per share over the last five years:

  Year

Earnings
Per Share

  2006

$

10.00

 

  2007

 

10.50

 

  2008

 

11.03

 

  2009

 

11.58

 

  2010

 

12.16

 
 

The earnings per share have grown at a constant rate (on a rounded basis) and will continue to do so in the future. Dividends represent 40 percent of earnings.

a. Project earnings and dividends for the next year (2011). (Round the growth rate to the nearest whole percent. Do not round any other intermediate calculations. Round your answers to 2 decimal places.)

 

2011

  Earnings

$

 

Dividend

$

 
 

b. If the required rate of return (Ke) is 13 percent, what is the anticipated stock price (P0) at the beginning of 2011? (Round the growth rate to the nearest whole percent. Do not round any other intermediate calculations. Round your answer to 2 decimal places.) 

  Anticipated stock price

$

Reference no: EM131178513

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