Question: a . Arts and Crafts, Inc. will pay a dividend of $2 per share in 1 year. It sells at $40 a share, and firms
a. Arts and Crafts, Inc. will pay a dividend of $2 per share in 1 year. It sells at $40 a share, and firms in the same industry provide an expected rate of return of 12%. What must be the expected growth rate of the company's dividends? (Do not round intermediate calculations. Enter your answer as a whole percent.)
Expected Growth Rate________%
Steady As She Goes Inc. will pay a year-end dividend of $3.90 per share. Investors expect the dividend to grow at a rate of 4% indefinitely.
b. If the stock currently sells for $39.00 per share, what is the expected rate of return on the stock? (Do not round intermediate calculations. Enter your answer as a whole percent.)
expected rate of return________%
c. If the expected rate of return on the stock is 16.50%, what is the stock price? (Do not round intermediate calculations. Enter your answers rounded to 2 decimal places.)
stock price________
d. Stormy Weather has no attractive investment opportunities. Its return on equity equals the discount rate, which is 20%. Its expected earnings this year are $4 per share. Complete the following table. (Leave no cells blank. Enter a zero, wherever necessary. Do not round intermediate calculations. Round growth rate to two decimal places.)
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