1. Pagemaster Enterprises just reported earnings of $2 million. It plans to retain 40 percent of its earnings. The historical return on equity (ROE) has been 0.16, a figure that is expected to continue into the future. How much will earnings grow over the coming year?

1. Pagemaster Enterprises, the company examined in the previous example, has 1,000,000 shares of stock outstanding. The stock is selling at $10. What is the required return on the stock?