Kendall Consulting Company is currently selling for $36, paying $1.80 in dividends, and investors expect dividends to grow at a constant rate of 8 percent a year.

a. If an investor requires a rate of return of 14 percent for a stock with the riskiness of Kendall Company, is it a good buy for this investor?

b. What is the maximum an investor with a 14 percent required return should pay for Kendall Company? What is the maximum if the required return is 15 percent?