What is Chen EPS growth rate

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Question - Chen Chocolate Company's EPS in 2020 was $1.80, and in 2015 it was $1.25. The company's payout ratio is 60%, and the stock is currently valued at $37.75. Flotation costs for new equity will be 12%. Net income in 2021 is expected to be $20 million.

The company's investment banker estimates that it could sell 15-year semiannual bonds with a coupon rate of 6.5%. The face value would be $1,000 and the flotation costs for a bond issue would be 1%. The market-value weights of the firm's debt and equity are 30% and 70%, respectively. The firm faces a 25% tax rate.

Based on the five-year track record, what is Chen's EPS growth rate? What will the dividend be in 2021?

Reference no: EM132820557

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