a. Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $4 per share. If the stock is selling at $50 per share, what must be the market's expectation of the growth rate of MBI dividends? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Growth rate %
b-1. If dividend growth forecasts for MBI are revised downward to 6% per year, what will be the price of the MBI stock? (Round your answer to 2 decimal places.)
Price $
b-2. What (qualitatively) will happen to the company's price–earnings ratio?
A. The P/E ratio will decrease.
B. The P/E ratio will increase.