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Calculation of gL and EPS Spencer Supplies' stock is currently selling for $60 a share....

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Finance

Calculation of gL and EPS

Spencer Supplies' stock is currently selling for $60 a share. The firm is expected to earn $6.00 per share this year and to pay a year-end dividend of $2.10.

  1. If investors require a 10% return, what rate of growth must be expected for Spencer? Round your answer to two decimal places. %
  2. If Spencer reinvests earnings in projects with average returns equal to the stock's expected rate of return, then what will be next year's EPS? (Hint: gL = ROE Retention ratio.) Do not round intermediate calculations. Round your answer to the nearest cent. $

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