1. Eastern Electric currently pays a dividend of about $1.72 per share and sells for $31 a share.

a. If investors believe the growth rate of dividends is 3% per year, what rate of return do they expect to earn on the stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. If investors' required rate of return is 10%, what must be the growth rate they expect of the firm? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. If the sustainable growth rate is 7% and the plowback ratio is 0.5, what must be the rate of return earned by the firm on its new investments? (Enter your answer as a percent rounded to 2 decimal places.)

2. Acadia, Inc. recorded restructuring charges of $235,542 thousand during fiscal 2017 related entirely to anticipated employee separation payments. Acadia, Inc. had never before incurred restructuring charges. At the end of the year, the company’s balance sheet included a restructuring accrual of $29,643 thousand.

The cash flow effect of Acadia’s restructuring during fiscal 2017 was:

A. $205,899 thousand

B. $235,542 thousand

C. $265,185 thousand

D. $ 29,643 thousand

E. None of the above