Baby Products Inc. has 2,000,000 shares of stock issued and outstanding. The expected earnings of the company are $8 million next year. The discount rate is 11%. (a) If Baby Products grows at 4% per year and the return on equity is 10%, calculate the plowback ratio.

(b) If the dividend paid by Baby Products is expected to grow at the rate in (a) above, what should be the price of its stock using the constant growth (growing perpetuity) stock pricing model?

(c) If Baby Products is a publicly traded company, how do analysts estimate the beta of the company? Explain.