a. Company XYZ forecasts to pay a GHc 8.33 dividend next year, which represents 100% of its earnings. This will provide investors with a 15% expected return. Instead, we decide to plough back 40% of the earnings at the firms current return on equity of 25%. What is the value of the stock before and after the plough back decision?

b. What will be the nominal rate of return on a preferred stock with a $100 par value, a stated dividend of 8 percent of par value, and current market price of (i) $160 (ii) $80