1. (Common stock valuation) Schlumberger is selling for $64.91 per share and paid a dividend of $1.10 last year. The dividend is expected to grow at 4 percent indefinitely. What is the stock’s expected rate of return?
2. When Sunil goes shopping, he comes across a T-shirt that is priced at $35. Although he wants to buy it, judging from the material used, he feels that the T-shirt should only cost $20. What reference price is Sunil using here?