1. Ruby Tuesdays (RI) earnings and dividends have grown at a rate of 8% over the past ten years, but dividend growth for the foreseeable future is expected to be about 6% annually. If the RRR for RI is 12%, is this a good investment, given the current stock price of $47.75 per share and the most recent annual dividend of $2.13 per share? Evaluate using the IRR approach.

2. Forman Industries follows an established policy of paying 25% of its annual earnings as dividends. Estimate Formans Sustainable Growth Rate (SGR) based on this and the following information for the most recent fiscal year:

Sales = $728 million

Net Income = $38 million

Total Assets = $624 million

Stockholders Equity = $185 million

The remaining problems use the price quotes shown below.