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Calculate the company growth rate of eps

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Bob's Rawhide Company has a dividend payout ratio of 30%. Next year it will earn $2.50 per share and have a return on equity of 15%. The shareholders' required return is 12%.

a. Calculate the company's growth rate of EPS.

b. Using the earnings model, what is the value of the stock?

c. Construct a data table that shows how the growth rate and value of the stock will change if the ROE ranges between 10% and 20%, in 1% increments. Now, using that data, create scatter chart to show the relationship between the value of the stock and the ROE. Is the relationship linear? At what point does the model break down?

d. Using the constant-growth dividend discount model, what is the value of the stock?

Reference no: EM132516461

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