Calculate the past growth rate in earnings

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Question: The Bouchard Company's current EPS is $6.50. It was $4.42 5 years ago. The company pays out 40 percent of its earnings as dividends, and the stock sells for $36.

a. Calculate the past growth rate in earnings. (Hint: This is a 5-year growth period.)

b. Calculate the next expected dividend per share, D1 [D0 0.4($6.50) $2.60]. Assume that the past growth rate will continue.

c. What is the cost of equity, rs, for the Bouchard Company?

Reference no: EM131524733

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