$1.$ FM corporation earns a ROE of $12\%.$ It reinvests one$-$half its earning and pays out the other half

as cash dividends. The cost of capital is $12\%$

$($a$)$ Given this ROE and dividend payout ratio, what is the growth rate of FM dividends?

$1$

$($b$)$ Assume this growth rate is expected to continue in perpetuity. What is the present value

of FM shares? Assume that book value per share is $$10$ and the first payment of dividends

happens at the end of the current year.

$($c$)$ Suppose FM decides to pay out all its earnings as cash dividends. Therefore it does not grow.

What is the present value of FM shares?