Colonial Properties Trust's (CLP) earnings per share (EPS), funds from operations (FFO), and dividends are as follows:

a) Compute the ratio of dividends to earnings and the ratio of dividends to funds from operations for each year and the average over the time period. Which ratio appears to be more stable? Verify your answer by computing the standard deviations around the averages.
b) Relate the dividend to earnings and to cash flow by computing the correlation between dividends and earnings and between dividends and cash flow. In which case is the correlation higher?
c) Determine the annual growth rate for dividends. (Review Chapter 11, if necessary.)
d) Apply the dividend growth model for CLP using your estimated growth rate and the current dividend of $2.70. (Review Chapter 9, if necessary.) Assume that the risk-free rate is 5 percent and that the expected return on the market is 12 percent. If the stock is selling for $41, is itundervalued?

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FFO $3.75 3.83 3.45 3.64 3.62 EPS $2.02 2.61 2001 2002 2003 2004 2005 Dividends $2.52 2.64 2.66 2.68 2.70 1.45 5.13