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A company has fallen on hard times and has experienced a decrease in its earnings per share (EPS) from $5.50 in 2006 to $4.60 last year (2011).


A company has fallen on hard times and has experienced a decrease in its earnings per share (EPS) from $5.50 in 2006 to $4.60 last year (2011). By standard practice, the company pays out 45 percent of its earnings as dividends per share (DPS), and the company’s stock price was selling for $14.65 in the secondary market (at the end of 2011).

(a) Calculate the growth rate in dividends (g) over this 5-year period.

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