Sidman s products stock is currently

QUESTION

Sidmans 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% return what rate of growth must be expected for Sidman?b. If Sidman reinvests earnings in projects with an aver
a. Re = (D1 / P0) G So, G = Re (D1 / P0) G = 0.09 ($3.6 / $60) G = 0.09 0.06 G = 0.03 = 3% b) Re = 9%; G =0.03; D1 = $5.40 Re = [D1 / P0] G 0.09 = [$5.40 / P0] 0.03 [$5.40 /

0] = 0.09 0.03 P0(Next year) = $5.40 / 0.06 P0(Next year) = $90 EPS = Ending Price Beginning Price = $90 $60 = $30

ANSWER:

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