- Consider firm F. You are at the beginning of year 1. F next dividend is paid in one year (end of year 1). Its expected value is $3. F's stocks trade at $37.5, its is 1.5, r=2% and E(rm)=8%. Assume that F pays a constant fraction of its net profit every year. Give an estimate of the annual growth of F's net profit from year 2 on. Hint: remember: P=D1/(rs-g) - Why