Input area: Net income Payout ratio Shares of stock outstanding Stock price ROE $ 25,000,000 40% 2,900,000 $ 109.00 11% Output area: NI will divide into two parts (dividends and retained eranings) Growth rate g= b*ROE = ROE* (1-payout ratio) 1 DO =total dividends / shares of stock outstanding = Net income * payout ratio / shares of stock outstanding Current dividends per share Dividend next year D1 = DO* (1+g) Required return R = D1/PO + g