INSTRUCTIONS: Kevin is getting nervous about his stock holding in CrottyCo. He bought the stock $11$ years ago at $$20$ per share, and the price is now $$77$ per share. CrottyCo. has a policy of paying out $25$ percent of its earnings in dividends, and Kevin expects the company to continue earning a $12$ percent return on equity. Yesterday, the stock paid an annual dividend of $$2\mathrm{.}50$ per share. Assume the discount rate for CrottyCo. is $14\%.$

What is the growth rate of the dividends?

What is the PVGO of CrottyCo?

What is the theoretical price of the stock?Therefore, the stock is $\_\_\_\_\_\_\_\_\_$ at $$77$ per share.

Assume Kevin's projections are correct. What should the firm do with its plowback rate?