Steady As She Goes Inc. will pay a year-end dividend of $3 per share. Investors expect the

Question:

Steady As She Goes Inc. will pay a year-end dividend of $3 per share. Investors expect the dividend to grow at a rate of 4% indefinitely.

a. If the stock currently sells for $30 per share, what is the expected rate of return on the stock?

b. If the expected rate of return on the stock is 16.5%, what is the stock price?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...