1. A firm is expected to have earnings next year of $5.44 per share and the firm is expected to pay a dividend of $3.42. Investors' required rate of return is 12%. If the sustainable growth rate is 3.5%, what must be the rate of return earned by the firm on its new investments? Enter your answer as a percentage. Enter your response below rounded to 2 DECIMAL PLACES.
2. Strawberry Co. has a stock that has a current price of $38.72. A year from now, the stock is expected to pay a dividend of $3.15 and the price will be $36.81. What is the expected rate of return for this stock? Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your response below rounded to 2 DECIMAL PLACES.
3. Consider a stock that will have dividends in the next three periods of $1.75, $1.89, and $1.96, respectively. The interest rate is 9%. What is the growth rate of the dividend in period 3? Enter your answer as a percentage. Enter your response below rounded to 2 DECIMAL PLACES.
4. Shield Corp. expects an earnings per share of $2.35 and reinvests 25% of its earnings. Management projects a rate of return of 2% on new projects and investors expect a 10% rate of return on the stock. What is the sustainable growth rate? Enter your answer as a percentage. Enter your response below rounded to 2 DECIMAL PLACES.