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# fm10 5 - s = r s =[D 1(1-F P g =[3(1-0.10(30 0.05 = 16.1...

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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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