Expected returns, dividends, and growth

The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows:

widehat$(P{)}_0=\frac{D_1}{(r_s-g)}$

If you were analyzing the consumer goods industry, for which kind of company in the industry would the constant growth model work best?

Mature companies with relatlvely predictable earnings

All companies

Young companies with unpredictable earnings grow at a constant rate of $9\mathrm{.}00\%$ per year. If Walter's stock currently trades for $$14\mathrm{.}00$ per share, what is the expected rate of return?

$13\mathrm{.}64\%$

$904\mathrm{.}26\%$

$946\mathrm{.}43\%$

$824\mathrm{.}29\%$ in the future?

It will decrease.

It will stay the same.

It will increase.