1. Franklin Corporation is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $32.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?
a. 7.61%
b. 7.37%
c. 6.89%
d. 7.13%
e. 6.65%
2. If D0 = $1.75, g (which is constant) = 3.6%, and P0= $51, what is the stock's expected total return for the coming year?
a. 6.55%
b. 7.33%
c. 7.59%
d. 6.81%
e. 7.07%