Dothan Inc. has a 10% ROE and a 30% dividend payout ratio. Its stock is currently selling at $50 per share and it recently paid a $2 dividend per share.
a) Calculate the internal growth rate of the company.
b) Find the expected dividend at the end of year 1 (next year's dividend).
c) If your required rate of return is 12%, find today's fair price to you. Should you purchase this stock?