How do you do Question 8 in the practice problems from the text (page 84)?
For part A I used Plowback Ration * ROE = 8% for the dividend growth rate, but for the expected return how do we find DIV1, P0, and P1?
How do we solve parts B & C?
I'd like to verify my answers for parts A and B. For part A I got that earnings will grow 12% and dividends will grow 8%. For part B, I got that the stock price will drop by 44.4%.
For part C, I know that the stock price will drop 44.4% (from part B), but how do you figure out what the actual stock price is?