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1. Suppose that the current price and the most recent dividend for a firm are $24.25 and $1.10, respectively. If the discount rate on the

1. Suppose that the current price and the most recent dividend for a firm are $24.25 and $1.10, respectively. If the discount rate on the stock is 8.5%, what is the implied growth rate?

2. Firm A has an ROE of 16% and a plowback ratio of 50%. The coming years earnings are expected to be $2 per share. The discount rate is 12%. a. What is the current fair price? b. What price do you expect Firm A shares to sell for in three years?

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