[coolmandrew]

I am trying to calculate the earnings growth rate, the dividend growth rate and the stock selling price based on the following information:

EPS
2007 $1,200,000
2002 $816,000

Dividends per Share
2007 $600,000
2002 $420,000

Book value per share
2007 $9,000,000

Total Assets
2007 $20,000,000

Total Debt
2007 $11,000,000

Sales
2007 $37,000,000

I do know that the EPS growth rate is 8% but have no idea how it was calculated. Can you help?

[ebaines]

Use the relationship:

(Final Value)/(Initial value) = (1 + Avg Growth%)^N

Where N is the number of years. You need to rearrange this to get the Avg Growth % by itself, which yields:

Avg Growth % = (Final Value/Initial Value)^1/N - 1

Now solve:

Avg Growth % = (1,200,000/816,000)^1/5 -1 = 1.47^0.2 -1 = 8.01%

[godisgood1]

Annual dividend of $.75. Stock selling price for $10.90 a share and has a required return of 11%. What is the growth rate of the dividend?

[ebaines]

The return on stock depends on both the dividend and change in market price of the stock. So unless you know what happens to the stock price, you can't determine what you need for dividends in order to have a total return of 11%.