1. Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $1.65 at the end of the year. Its dividend is expected to grow at a constant rate of 8.50% per year. If Walters stock currently trades for $25.00 per share, then the expected rate of return on the stock is _________ ?

2. Which of the following conditions must hold true for the constant growth valuation formula to be useful and give meaningful results?

a. The required rate of return, rsrs, must be greater than the long-run growth rate.

b. The companys stock cannot be a zero growth stock.

c. The companys growth rate needs to change as the company matures.