1. You just purchased a stock for $50 and expect to receive dividends of $2.00 per year for the next 5 years and then be able to sell the stock for $85 at the end of year 5. What rate of return are you projecting? please explain.

2. Mountain Industries' earnings this year are expected to be $4.45 per share. Your required rate of return is 11.5% and the firm pays no dividends. Competitors in the industry sell at an average P/E ratio of 15, but Mountain Industries is projected to grow its earnings faster than its competitors and do you believe a P/E ratio of 17 is appropriate? Which is your estimate of Mountain's value?