Problem 7-30 Nonconstant Growth (LO2, 3)

Tattletale News Corp. has been growing at a rate of 10% per year, and you expect this growth rate in earnings and dividends to continue for another 3 years. The last dividend paid was $4. The discount rate is 17% and the steady growth rate after 3 years is 2%.

a. What is the capital gain in stock price from year 0 to year 1? (Do not round intermediate calculations. Enter your answer as a dollar amount rounded to 3 decimal places.)

b. Calculate the expected rate of return. (Do not round intermediate calculations. Round your answer to the nearest whole percent.)