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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
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