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What is the sustainable growth rate

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1. Stark Industries expects an earnings per share of $2.87 and reinvests 40% of its earnings. Management projects a rate of return of 5% on new projects and investors expect a 5% rate of return on the stock. What is the sustainable growth rate? Enter your answer as a percentage. Do not include the percentage sign in your answer.

A. Enter your response below rounded to 2 DECIMAL PLACES.

Correct response: 2±0.01%

Click "Verify" to proceed to the next part of the question.

B. Given a sustainable growth rate of 2%, what is the price of the stock with growth?

Enter your response below rounded to 2 DECIMAL PLACES.

2. Consider a stock that will have dividends in the next three periods of $1.50, $1.74, and $1.79, respectively. The interest rate is 11%. What is the growth rate of the dividend in period 3? Enter your answer as a percentage. Do not include the percentage sign in your answer.

A. Enter your response below rounded to 2 DECIMAL PLACES.

Correct response: 2.87±0.01%

B. If the growth rate is expected to be 2.87% indefinitely, what is the price of the stock in period 2?

Enter your response below rounded to 2 DECIMAL PLACES.

Click "Verify" to proceed to the next part of the question.

Reference no: EM133070229

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