Conceptual Overview Explore how the value of a stock changes as a function of the discount interest rate Po - 21 PVD, Dicles) SL1510.01) 0 0 000 -$29.90 Dividend (1) 1. Ifr, increases to 10%, what would be the value of the constant growth stock? (Note: Do Is $1.15 and the expected constant growth rate 9 - 4%.) a. $29.90 b. $19.93 C. $10.87 d. Undetermined 2. When increases from, say, 8% to 10%, the value of the constant growth stock: a. Increases because the interest rate is higher. 1. Decreases because its dividends are being discounted at a higher rate. c. Remains the same because it is a constant growth stock. d. Might either increase or decrease Move the sides so that is 12. the stock were selling on the market for $15.50, would you buy it? (Note: Dois $1.15 and the expected growth constant rate g - 45.) a. Yes, it is a bargain the stock is overved as the expected stack price is only $14.95 c. Not enough information to determine whether would be a good buy. 4. The slider for s t om o 4.15 that is a greater than . Move their to the minimum and observe how the present value of the stock changes. Must be greater than a. No reason I needs to be greater than a because the forma adjust the value of the stock appropriately Yes, because then the forma divides by mero, producing an infinite value