a) Computer stocks currently provide an expected rate of return of 14%. MBI, a large computer company, will pay a year-end dividend of $1 per share. If the stock is selling at $20 per share, what must be the market's expectation of the growth rate of MBI dividends?
b) If dividend growth forecasts for MBI are revised downward to 4% per year, what will be the price of the MBI stock?