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COST OF COMMON EQUITY The Bouchard Company’s EPS was $6.50 in 2016, up from $4.42 in 2011. The company pays out 40% of its earnings as dividends, and its common stock sells for $36.00. a. Calculate the past growth rate in earnings. (Hint: This is a 5-year growth period.) b. The last dividend was D 0 = 0 4($6.50) = $2.60. Calculate the next expected dividend, D 1 , assuming that the past growth rate continues. c. What is Bouchard's cost of retained earnings, r s ?

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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937
BuyFind

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937

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Chapter
Section
Chapter 10, Problem 16P
Textbook Problem

COST OF COMMON EQUITY The Bouchard Company’s EPS was $6.50 in 2016, up from $4.42 in 2011. The company pays out 40% of its earnings as dividends, and its common stock sells for $36.00.

  1. a. Calculate the past growth rate in earnings. (Hint: This is a 5-year growth period.)
  2. b. The last dividend was D0 = 0 4($6.50) = $2.60. Calculate the next expected dividend, D1, assuming that the past growth rate continues.
  3. c. What is Bouchard's cost of retained earnings, rs?

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