Gentleman Gym just paid its annual dividend of $3 per share, and it is widely expected that the dividend will increase by 5% per year Indefinitely. (Round your answers to the nearest cent.) a. What price should the stock sell at? The discount rate is 15% Stock price $ 31.5 b. How would your answer change of the discount rate were only 12%? Stock prices 63 why does the answer change? The lower discount rate makes the present value of future dividends higher raising the value of the stock. c. What is the estimated stock price if the dividend is expected to decrease by 5% per year indefinitely and the discount rate is 15%? Stock price $ Eastern Electric's recent annual dividend was $1.64 per share and its stock currently sells for about $27 per share. (Round your answers to 2 decimal places.) a. If Investors belleve the growth rate of dividends is 3% per year, what rate of return do they expect to eam on the stock? Rate of return 9.26 b. Investors' required rate of return is 10%, what must be the growth rate they expect of the form? Rate of return 3.7 % c. If the sustainable growth rate is 5% and the plowback ratio is 4, what must be the rate of return earned by the firm on its new Investments? Rate of return 12.5%