Answer:
The current stock price is $33.33
Explanation:
The plowback ratio is also known as the retention ratio (RR).
The growth rate or the sustainable growth rate is the rate at which the dividends will increase every year indefinitely.
Thus, the growth rate in dividends is = ROE * RR
g = 0.16 * 0.75 = 0.12 or 12%
The current stock price is = D1 / (r - g)
Thus, current price = 2 / (0.18 - 0.12) = $33.33
