Required rate of return on bob stock

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Bob Properties Inc. is expected to pay a dividend next year of $2..45 per share. Investors think that Bob Inc. will continue to increase it's dividend by 5% each year for the foreseeable future.

a. If the required rate of return on Bob stock is 13% then what is Bob Inc.'s stock price?

b. Investors expect Bob Inc. to pay out 50% of its earnings as dividends. What is Bob Inc.'s price/earning ratio? ( Here P/E is defined as current price divided by next year's earnings.)

Reference no: EM132234917

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