Eastern Electric currently pays a dividend of about $1.72 per share and sells for $31 a share.
a. If investors believe the growth rate of dividends is 3% per year, what is the opportunity cost of capital? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Cost of Capital %
b. If investors' opportunity cost of capital is 10%, what must be the growth rate they expect of the firm?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Growth rate %
c. If the sustainable growth rate is 7% and the plowback ratio is .5, what must be the return on equity ROE? (Round your answer to 2 decimal places.)
ROE %