d. Suppose Schuler has a change in management. The new group institutes policies that increase the expected constant growth rate to 6%. Also, the new management stabilizes sales and profits and thus causes the beta coefficient to decline from 1.5 to 1.3. Assume that rRF and rM are equal to the values in part

c. After all these changes, what is Schuler’s new equilibrium price?

(Note: D1 goes to $2.27.)

CHALLENGING PROBLEMS 17–19