1. The Fort Murray Realty Ltd is presently trading at $66 per share. Given the current business and financial characteristics of the company and the current capital market conditions. Investors require a 15-percent rate of return on the companys common shares. The company has just paid a $3 dividend per share.

a. Determine the long run average annual growth in dividend per share that is currently being expected.

b. Suppose due to a sudden downturn in the real estate sector of the economy, investors now expect the future per-share dividend payments of the company to decline at an average annual rate of 6 percent but, in view of their alternative investment opportunities, they still require a 15-percent rate of return on the companys common shares. How will this change in investors expectations affect the market price of the companys common shares?