A stock sells for $40. The next dividend will be $2 per share. If the rate of return earned on reinvested funds is a constant 12% and the company reinvests 50% of earnings in the firm, what must be the discount rate? Gentleman Gym just paid its annual dividend of $3 per share, and it is widely expected that the dividend will increase by 4% per year indefinitely. a. What price should the stock sell at if the discount rate is 12%. b. What price should the stock sell at if the discount rate is 10%.