6- . Over the long run, you expect dividends for BBC in Problem 4 to grow at 8 percent and you require
11 percent on the stock. Using the infinite period DDM, how much would you pay for this stock?


8- The Shamrock Dogfood Company (SDC) has consistently paid out 40 percent of its earnings in divi- dends. The company’s return on equity is 16 percent. What
would you estimate as its dividend
growth rate?


10- What P/E ratio would you apply if you learned that SDC had decided to increase its payout to
50 percent? (Hint: This change in payout has multiple effects.)

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