CALCULATION OF g AND EPS
Sidman Products's common stock currently sells for $44 a share. The firm is expected to earn $4.84 per share this year and to pay a year-end dividend of $2.00, and it finances only with common equity.
a) If investors require a 11% return, what is the expected growth rate? Round your answer to two decimal places. Do not round your intermediate calculations.
%
b) If Sidman reinvests retained earnings in projects whose average return is equal to the stock's expected rate of return, what will be next year's EPS? (Hint: g = (1 – Payout ratio)ROE). Round your answer to the nearest cent. Do not round your intermediate calculations.
$ per share