The Bouchard Company's EPS was $5.40 in 2021, up from $3.26 in 2016. The company pays out 50% of its earnings as dividends, and its common stock sells for $33.00. Calculate the past growth rate in earnings. (Hint: This is a 5-year growth period.) Round your answer to two decimal places. % The last dividend was D0 = 0.50($5.40) = $2.70. Calculate the next expected dividend, D1, assuming that the past growth rate continues. Do not round intermediate calculations. Round your answer to the nearest cent. $ What is Bouchard's cost of retained earnings, rs? Do not round intermediate calculations. Round your answer to two decimal places. % Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 12%, and a tax rate of 25%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $3, and the current stock price is $33. What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's net income is expected to be $1.2 billion, what portion of its net income is the firm expected to pay out as dividends? Do not round intermediate calculations. Round your answer to two decimal places. (Hint: Refer to Equation below.) Growth rate = (1 - Payout ratio)ROE %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 10P

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Related questions

Question

The Bouchard Company's EPS was $5.40 in 2021, up from $3.26 in 2016. The company pays out 50% of its earnings as dividends, and its common stock sells for $33.00.

Calculate the past growth rate in earnings. (Hint: This is a 5-year growth period.) Round your answer to two decimal places.

%
The last dividend was D₀ = 0.50($5.40) = $2.70. Calculate the next expected dividend, D₁, assuming that the past growth rate continues. Do not round intermediate calculations. Round your answer to the nearest cent.

$
What is Bouchard's cost of retained earnings, r_s? Do not round intermediate calculations. Round your answer to two decimal places.

%

Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 12%, and a tax rate of 25%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D₁) is $3, and the current stock price is $33.

What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places.

%
If the firm's net income is expected to be $1.2 billion, what portion of its net income is the firm expected to pay out as dividends? Do not round intermediate calculations. Round your answer to two decimal places. (Hint: Refer to Equation below.)

Growth rate = (1 - Payout ratio)ROE

%