A firm pays a $2.50 dividend at the end of year one (D₁), has a stock price of $144 (P₀), and a constant growth rate (g) of 11 percent.

a. Compute the required rate of return (K_e). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

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____________