A firm pays a $1.50 dividend at the end of year one (D₁), has a stock price of $151 (P₀), and a constant growth rate (g) of 9 percent.

a. Compute the required 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.

b. If the dividend payment increases:

dividend yield

required rate of return

c. If theexpected growth rate increases:

required rate of return?

d. If the stock price increases:

dividend yield

required rate of return