Question
Eastern Electric currently pays a dividend of about $1.71 per share and sells for $25 a share. a. If investors believe the growth rate of
Eastern Electric currently pays a dividend of about $1.71 per share and sells for $25 a share. |
a. | If investors believe the growth rate of dividends is 4% per year, what is the opportunity cost of capital? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Cost of Capital | % |
b. | If investors' opportunity cost of capital is 10%, what must be the growth rate they expect of the firm? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Growth rate | % |
c. | If the sustainable growth rate is 5% and the plowback ratio is .5, what must be the return on equity ROE? (Round your answer to 2 decimal places.) |
ROE | % |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started