Response to the following questions:
1. a. What is the relation between the expected growth rate of common stock dividends and the dividend payout?
b. What is the rationale behind this relation?
2. The Goofy Gadget Company currently pays a dividend of $2.50 per common share. If dividends are expected to grow at a rate of 5% per year and the required rate of return on Goofy common stock is 8%, what is the value of a share of Goofy stock?