A. Star Manufacturing is expected to pay a dividend of $1.00 per share at the end of the year (D1 = $1.00). The stock sells for $40 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?
B. If D0 = $1.20, g (which is constant) = 4%, and P0 = $26.00, what is the stock's expected dividend yield for the coming year?