DFB$,$ Inc. expects earnings next year of $$4\mathrm{.}29$ per share, and it plans to pay a $$2\mathrm{.}78$ dividend to shareholders $($assume that is one year from now$).$ DFB will retain $$1\mathrm{.}51$ per share of its earnings to

reinvest in new projects that have an expected return of $14\mathrm{.}3\%$ per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and

will not change its number of outstanding shares. Assume next dividend is due in one year.

a$.$ What growth rate of earnings would you forecast for DFB$?$

b$.$ If DFB$\text{'}$s equity cost of capital is $11\mathrm{.}7\%,$ what price would you estimate for DFB stock today?

c$.$ Suppose instead that DFB paid a dividend of $$3\mathrm{.}78$ per share at the end of this year and retained only $$0\mathrm{.}51$ per share in earnings. That is it chose to pay a higher ding

in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its dividend?