Question
Eastern Electric currently pays a dividend of about $1.78 per share and sells for $36 a share. a. If investors believe the growth rate of
Eastern Electric currently pays a dividend of about $1.78 per share and sells for $36 a share. a. If investors believe the growth rate of dividends is 3% 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 12%, 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 .4, what must be the return on equity ROE? (Round your answer to 2 decimal places.) ROE %
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