Eastern Electric currently pays a dividend of $1.64 per share and sells for $27 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.) b. If investors' required rate of return is 10%, 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 5% 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.)
Resubmission: I don't understand why b & c were marked as incorrect
Eastern Electric currently pays a dividend of $1.64 per share and sells for $27 a share.
a. If investors believe the growth rate of dividends is 3% per year, what
b. If investors' required rate of return is 10%, 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 5% 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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