A firm pays a $1.50 dividend at the end of year one (D₁), has a stock price of $65 (P₀), and a constant growth rate (g) of 8 percent.

Compute the required rate of return (K_e). Rate of return %?

Indicate whether each of the following changes will increase or decrease the required rate of return (K_e). (Each question is separate from the others. That is, assume only one variable changes at a time.) No actual numbers are necessary.

If the dividend payment increases:

Dividend yield?

Required rate of return?