Question: 1. (Measuring growth) Septian, Inc.'s return on equity is 16 percent, and the management plans to retain 60 percent of earnings for investment purposes. What will be the firm's growth rate?
2. (Common stock valuation) Abercrombie & Fitch's common stock pays a dividend of $0.70. It is currently selling for $34.14. If the firm's investors require a 10 percent return on their investment from buying Abercrombie & Fitch stock, what growth rate would Abercrombie & Fitch have to provide the investors?