Casual Construction Corporation (CCC) earned $60,000,000 during 2009. The fi rm expects to earn $63,000,000 during 2010, in line with its long-term earnings growth rate. There are 20 million CCC shares outstanding, and the firm has a policy of paying out 40 percent of its earnings as cash dividends. Investors require a 10 percent return on CCC shares.
a. What is CCC's current dividend per share? What is it expected to be next year?
b. Use the Gordon growth model (see Equation) to calculate CCC's stock price today.
Equation:- g = rr * ROE