fm10 5 - s = ? r s = [D 1 /(1-F) P ] + g = [3/(1-0.10)(30)]...

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10-12 a. r s = 0 1 P D + g 0.09 = 00 . 60 $ 60 . 3 $ + g 0.09 = 0.06 + g g = 3%. b. Current EPS $5.400 Less: Dividends per share 3.600 Retained earnings per share $1.800 Rate of return × 0.090 Increase in EPS $0.162 Current EPS 5.400 Next year's EPS $5.562 Alternatively, EPS 1 = EPS 0 (1 + g) = $5.40(1.03) = $5.562. 10-13 P 0 = $30; D 1 = $3.00; g = 5%; F = 10%; r
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Unformatted text preview: s = ? r s = [D 1 /(1-F) P ] + g = [3/(1-0.10)(30)] + 0.05 = 16.1%. 10-14 Enter these values: N = 20, PV =1000(1-0.02) = 980, PMT = -90(1-.4)=-54, and FV = -1000, to get I = 5.57%, which is the after-tax component cost of debt. Answers and Solutions: 10 - 5...
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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