A firm will pay a dividend of $3 per share in the next 12 months (D₁). The required rate of return is 10 percent and the constant growth rate is 5 percent.

a. Compute P₀.

(For parts b, c, d in this problem, all variables remain the same except the one specifically changed. Each question is independent of the others.)

b. Assume r_s, the required rate of return, goes up to 12 percent; what will be the new value of P₀?

c. Assume the growth rate (g) goes up to 7 percent; what will be the new value of P₀? r_s goes back to its original value of 10 percent.

d. Assume D₁ is $3.50; what will be the new value of P₀? Assume r_s is at its original value of 10 percent and g goes back to its original value of 5 percent.