A)

Dexxler Corp. common stock currently sells for $32.80 per share. The last annual dividend (just paid) was $1.40 and these dividends are expected to grow indefinitely at a 7% annual rate. What is the implied required rate of return for Dexxler common stock?

B)

Herman Becker (HB) Corp. just announced a 14.5% decline in quarterly earnings. The price of HB common stock increased nearly 10% within a few minutes of the announcement. Why might investors have a positive reaction to such an announcement?