Calculation of g L and EPS Spencer Supplies' stock is currently selling for $60 a share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $1.80. If investors...

Calculation of g_L and EPS

Spencer Supplies' stock is currently selling for $60 a share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $1.80.

1. If investors require a 9% return, what rate of growth must be expected for Spencer? Round your answer to the nearest whole number.
   

     %

   
   


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: g_L = ROE × Retention ratio.) Do not round intermediate calculations. Round your answer to the nearest cent.
   

   $