Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $2 per share.

Requirement 1:

If the stock is selling at $50 per share, what must be the market's expectation of the growth rate of MBI dividends? (Omit the "%" sign in your response.)

Growth rate

%

Requirement 2:

(a)	If dividend growth forecasts for MBI are revised downward to 5% per year, what will happen to the price of MBI stock?
	(Click to select)Rises or Falls

(b)	What (qualitatively) will happen to the company's priceearnings ratio?
	(Click to select)Decreases or Increases