Question: I am having difficulty solving for both B & C. Eastern Electric currently pays a dividend of about $1.89 per share and sells for $36
I am having difficulty solving for both B & C.
Eastern Electric currently pays a dividend of about $1.89 per share and sells for $36 a share.
a.If investors believe the growth rate of dividends is 3% per year, what rate of return do they expect to earn on the stock?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
I calculated 8.40%
b.If investors' required rate of return is 12%, what must be the growth rate they expect of the firm?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
c.If the sustainable growth rate is 2% and the plowback ratio is 0.4, what must be the rate of return earned by the firm on its new investments?(Enter your answer as a percent rounded to 2 decimal places.)
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