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Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $4 per share.

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Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $4 per share. If the stock is selling at $50 per share, what must be the market's expectation of the growth rate of MBI dividends? If dividend growth forecasts for MBI are revised downward to 6% per year, what will be the price of the MBI stock? What (qualitatively) will happen to the company's price-earnings ratio? Increases Decreases

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