Sidman Products' common stock currently sells for $60.00 a share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $3.60, and it finances only with common equity.
a. If investors require a 9% return, what is the expected growth rate?
b. If Sidman reinvest retained earnings in projects whose average return is equal to the stock's expected rate of return, what will be next year's EPS?