The ordinary shares of OLO Ltd are expected to pay a dividend of $1.00 at the end of year 1 and market analysts expect that dividend to grow at 15% p.a. for the next three years before the growth rate drops to 5% p.a. for the foreseeable future. If the expected return on these shares is 15% their price today is closest to:

a) $9.10.

b) $12.60.

c) $14.10.

d) $16.00.

Market analysts expect the earnings per share of JLC Ltd to be $3.00 next year. The company has typically retained 40% of its earnings and this policy is expected to continue in the foreseeable future. The return required by investors on companies in JLC’s risk class is 10% p.a. and JLC’s shares are currently selling for $45.00 per share. Based on this information, the implied growth rate of JLC’s dividends (and earnings) is closest to:

a) 3.3% p.a.

b) 4.0% p.a.

c) 6.0% p.a.

d) 7.3% p.a.