12. Young-R-Us Company presently does not pay out dividends, even though it had earnings of $2 per share last year.

If the interest rate is 4 percent, what is the price of the firm’s stock if earnings are expected to grow forever at an annual rate of

(a) . 1 percent?

(b) . 2 percent?

(c) . 3 percent?

(d) . Based on your results in parts a-c, graph the relationship between the growth rate and the price of Young-R-Us’s stock price.