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What must be the rate of return earned by the firm

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Reference no: EM132040958

Eastern Electric currently pays a dividend of about $1.95 per share and sells for $36 a share.

a. If investors believe the growth rate of dividends is 4% per year, what rate of return do they expect to earn on the stock

b. If investors' required rate of return is 12%, what must be the growth rate they expect of the firm?

c. If the sustainable growth rate is 4% and the plowback ratio is 0.2, what must be the rate of return earned by the firm on its new investments?

Reference no: EM132040958

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