Eastern Electric currently pays a dividend of about $1.86 per share and sells for $26 a...

80.2K

Verified Solution

Question

Finance

Eastern Electric currently pays a dividend of about $1.86 pershare and sells for $26 a share.
a.
If investors believe the growth rate of dividends is 2% peryear, what rate of return do they expect to earn on the stock?(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.)
  Rate of return %
b.
If investors' required rate of return is 15%, what must be thegrowth rate they expect of the firm? (Do not roundintermediate calculations. Enter your answer as a percent roundedto 2 decimal places.)
  Growth rate %
c.
If the sustainable growth rate is 4% and the plowback ratio is.8, what must be the rate of return earned by the firm on its newinvestments? (Enter your answer as a percent rounded to 2decimal places.)
  Rate of return %

Answer & Explanation Solved by verified expert

4.3 Ratings (811 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Eastern Electric currently pays a dividend of about $1.86 pershare and sells for $26 a share.a.If investors believe the growth rate of dividends is 2% peryear, what rate of return do they expect to earn on the stock?(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.) Rate of return% b.If investors' required rate of return is 15%, what must be thegrowth rate they expect of the firm? (Do not roundintermediate calculations. Enter your answer as a percent roundedto 2 decimal places.) Growth rate%c.If the sustainable growth rate is 4% and the plowback ratio is.8, what must be the rate of return earned by the firm on its newinvestments? (Enter your answer as a percent rounded to 2decimal places.) Rate of return%