12.9

California Clinics, an investor-owned chain of ambulatory are clinics, just paid a dividend of $2 per share. The firms dividend is expected grow at a constant rate of 5% per year and investors required a 15% rate of return on the stock.

a). what is the stock value?

b). Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13%. Under conditions, what is the stocks value?