Computer stocks currently provide an expected rate of return of 24%. MBI, a large computer company, will pay a year-end dividend of $3.50 per share.

a.	If the stock is selling at $65 per share, what must be the market's expectation of the growth rate of MBI dividends? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Growth rate

%

b-1.

If dividend growth forecasts for MBI are revised downward to 11% per year, what will happen to the price of MBI stock?

	The price will rise.
	The price will fall.

b-2.

What (qualitatively) will happen to the company's priceearnings ratio?

	The priceearnings ratio will rise.
	The priceearnings ratio will fall.