Question
10) Ecology Labs, Inc., will pay a dividend of $5.25 per share in the next 12 months (D 1 ). The required rate of return
10)
| Ecology Labs, Inc., will pay a dividend of $5.25 per share in the next 12 months (D1). The required rate of return (Ke) is 22 percent and the constant growth rate is 10 percent.(Each question is independent of the others.) |
| a. | Compute the price of Ecology Labs' common stock.(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Price | $ |
| b. | AssumeKe, the required rate of return, goes up to 25 percent. what will be the new price?(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| New price | $ |
| c. | Assume the growth rate (g) goes up to 15 percent. what will be the new price?Kegoes back to its original value of 22 percent.(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| New price | $ |
| d. | AssumeD1is $6.00. what will be the new price? Assume Keis at its original value of 22 percent and g goes back to its original value of 10 percent.(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| New price | $ |
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Fundamentals of Financial Management
Authors: Eugene F. Brigham
Concise 9th Edition
1305635937, 1305635930, 978-1305635937
