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Question

Steady As She Goes Inc. will pay a year-end dividend of $2.80 per share. Investors expect the dividend to grow at

a rate of 4% indefinitely.

a. If the stock currently sells for $28.00 per share, what is the expected rate of return on the stock? (Do not round intermediate calculations. Enter your answer as a whole percent.)

b. If the expected rate of return on the stock is 16.50%, what is the stock price? (Do not round intermediate calculations.)

Stormy Weather has no attractive investment opportunities. Its return on equity equals the discount rate, which is 5%. Its expected earnings this year are $2 per share. Complete the following table. (Do not round intermediate calculations. Enter the growth rate as a whole percent.)

 
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