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Calculate the growth rate in dividends

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Reference no: EM131799205

Question - The Mountain Fresh Company had earnings per share (EPS) of $6.32 in 2006 and $11.48 in 2011. The company pays out 30 percent of its earnings as dividends per share (DPS), and the company's stock price is currently $37.50 (in 2011).

(a) Calculate the growth rate in dividends (g) over this 5-year period.

(b) Calculate the expected dividend per share next year (i.e., what is D1, assuming the earnings and dividends of Mountain Fresh growth at a constant rate).

(c) Based on the information given above, what is the cost of retained earnings common equity (rs) for Mountain Fresh Company?

Reference no: EM131799205

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