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VICINO Contrary to the conservative securities analysts, Jordan Ellis believed that the company could maintain a constant annual growth rate in dividends per share of 6% in the future, or possibly 8% for the next 2 years and 6% thereafter, Ellis based his estimates on an established long-term expansion plan into European and Latin American markets. Venturing into these markets was expected to cause the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 8.8% to 10%. Currently, the risk-free rate is 6%. In preparing the long-term financial plan, Encore's chief financial officer has as- signed a junior financial analyst, Marc Scott, to evaluate the firm's current stock price. He has asked Marc to consider the conservative predictions of the securities analysts and the aggressive predictions of the company founder, Jordan Ellis. Marc has compiled the following 2015 financial data to aid his analysis. Data item Earnings per share (EPS) Price per share of common stock Book value of common stock equity Total common shares outstanding Common stock dividend per share 2015 value $6.25 $40.00 $60,000,000 2,500,000 $4.00 TO DO a. What is the firm's current book value per share? b. What is the firm's current P/E ratio? c. (1) What is the current required return for Encore stock? (2) What will be the new required return for Encore stock assuming that the firm expands into European and Latin American markets as planned? d. If the securities analysts are correct and there is no growth in future dividends, what will be the value per share of the Encore stock? (Note: Use the new required return on the company's stock here.)

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