Adu-Agyei Manufacturing is a mature firm in the machine tool component

industry. The firm's most recent common stock dividend was GHS2.40 per share.

Because of its maturity as well as its stable sales and earnings, the firm's

management feels that dividends will remain at the current level for the

foreseeable future.

If the required return is 12%, what will be the value of Adi-Agyei's

common stock?

If the firm's, risk as perceived by market participants suddenly increases,

causing the required return to rise to 20%, what will be the common stock

value?

Judging on the basis of your findings in parts (2) and (if), what impact does

risk have on value? Explain