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    Expected rate of growth & EPS

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    Sidman's products' stock is currently selling for $60 per share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $3.60.

    a. If investors require a 9 percent return what rate of growth must be expected for Sidman?

    b. If Sidman reinvests earnings in projects with an average return equal to the stock's expected rate of return, what will be next year's EPS? (Hint: g = ROE (Payout rate or Retention Ratio)

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    Solution Preview

    Sidman's products' stock is currently selling for $60 per share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $3.60.
    a. If investors require a 9 percent return what rate of growth must be expected for ...

    Solution Summary

    Calculates expected growth rate in dividends and EPS.

    $2.19

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