# Stocks- rate of growth, EPS

Problem 10-12. Calculation of g and EPS Spencer Supplies' common stock is currently selling for $61 a share. The firm is expected to earn $5.70 per share this year and to pay a year-end dividend of $2.10.

a. If investors require a 8% return, what rate of growth must be expected for Spencer? Round the answer to the nearest hundredth.

b. If Spencer reinvests earnings in projects with average returns equal to the stock's expected rate of return, what will be next year's EPS? [Hint: g = ROE(Retention ratio).] Round the answer to the nearest hundredth.

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#### Solution Preview

Problem 10-12. Calculation of g and EPS Spencer Supplies' common stock is currently selling for $61 a share. The firm is expected to earn $5.70 per share this year and to pay a year-end dividend of $2.10.

a. If investors require ...

#### Solution Summary

Growth rate for stock and EPS have been calculated.