(Common stock valuation) Dalton Inc. has a return on equity of 10.7 percent and retains 55 percent of its earnings for reinvestment purposes. It recently paid a dividend of $2.75 and the stock is currently selling for $41.
a. What is the growth rate for Dalton Inc.?
b. What is the expected return for Dalton's stock?
c. If you require a 13 percent return, should you invest in the firm?