a. Find the current value per share of Suarez Manufacturing's common stock.

The growth rate of dividends is ?% (round to the two decimal place).

The Current value per share will be $? (round to the nearest cent).

b. Find the value of Suarez's common stock in the event that it undertakes the proposed risky investment and assuming that the dividend growth rate stays at 13.0% forever. Compare this value to that found in part (a).

The value of common stock if the risky investment is made will be $? (Round to the nearest cent.)

What effect would the proposed investment have on the firm's stockholders? Explain.

(Select from the drop-down menu.)

The higher growth rate associated with undertaking the investment

(Increase OR Decrease) the market value of the stock? Choose Increase or Decrease

c. On the basis of your findings in part (b), do the stockholders win or lose as a result of undertaking the proposed risky investment? Should the firm do it? Why?(Select from the drop-down menus.)

The firm

Should or should not

undertake the proposed project. The price per share

increases or decreases

by

$19.99.

Although risk

Increased or decreased

and

increased or decreased

the required return, the

higher or lower

dividend growth offsets this

higher or lower

risk resulting in a net

increase or decrease

in value.

d. Rework parts (a) and (b) assuming that at the beginning of 2016 the annual dividend growth rate returns to the rate experienced between 2008 and 2012.

The annual per share dividend for 2014 will be

$? (Round to the nearest cent.)

The annual per share dividend for 2015 will be

$? (Round to the nearest cent.)

The annual per share dividend for 2016 will be

$?(Round to the nearest cent.)

The value per share for 2015 will be

$?. (Round to the nearest cent.)

Assuming the lower growth rate beginning in 2016, the value per share today will be

$? (Round to the nearest cent.)

Should the firm undertake the investment?(Select from the drop-down menus.)

No or Yes

,

the firm should not undertake the proposed project. The price per share

decreases or increase

by

$14.18.

The

Increase or decrease

in risk and

increase or decrease

in required return is not offset by the

increase or decrease

in cash flows. The

longer or shorter

term of the growth is an important factor in this decision.

Assessing the Impact of Suarez Manufacturing's Proposed Risky Investment on Its Stock Value Early in 2013, Inez Marcus, the chief financial officer for Suarez Manufacturing, was given the task of assessing the impact of a proposed risky investment on the firm's stock value. To perform the necessary analysis, Inez gathered the following information on the firm's stock. During the immediate past 5 years (2008-2012), the annual dividends paid on the firm's common stock were as follows: (Click on the icon o located on the top-right corner of the data table below in order to copy its content into a spreadsheet.) Year 2012 2011 2010 2009 2008 Dividend per share $1.90 1.70 1.55 1.40 1.30 Assessing the Impact of Suarez Manufacturing's Proposed Risky Investment on Its Stock Value Early in 2013, Inez Marcus, the chief financial officer for Suarez Manufacturing, was given the task of assessing the impact of a proposed risky investment on the firm's stock value. To perform the necessary analysis, Inez gathered the following information on the firm's stock. During the immediate past 5 years (2008-2012), the annual dividends paid on the firm's common stock were as follows: (Click on the icon o located on the top-right corner of the data table below in order to copy its content into a spreadsheet.) Year 2012 2011 2010 2009 2008 Dividend per share $1.90 1.70 1.55 1.40 1.30