Your supervisor has asked you to evaluate the relative attractiveness of the stocks of two very similar chemical companies. Litchfield Chemical Corp. (LCC) and Aminochem Company (AOC). Both firms have a June 30 fiscal year end. You have compiled the data in Table 1 for this purpose. Use a 1-year time horizon and assume the following:

Real gross domestic product is expected to rise 5%;

S&P 500 expected total return of 20%;

U.S. Treasury bills yield 5%; and

30 year U.S. Treasury bonds yield 8%.

QCalculate the internal (implied, normalized, or sustainable) growth rate of LCC and AOC. Show your work.

Table 1
	Litchfield Chemical (LCC)	Aminochem (AOC)
Current stock price	$50	$30
Shares outstanding (millions)	10	20
Projected earnings per share (fiscal 1996)	$4.00	$3.20
Projected dividend per share (fiscal 1996)	$0.90	$1.60
Projected dividend growth ate	8%	7%
Stock beta	1.2	1.4
Investors required rate of return	10%	11%
Balance sheet data (millions)
Long-term debt	$100	$130
Stockholders equity	$300	$320