Question
Ecology Labs, Inc., will pay a dividend of $3.90 per share in the next 12 months (D1). The required rate of return (Ke) is 22
Ecology Labs, Inc., will pay a dividend of $3.90 per share in the next 12 months (D1). The required rate of return (Ke) is 22 percent and the constant growth rate is 10 percent. (Each question is independent of the others.) a. Compute the price of Ecology Labs' common stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price $ b. Assume Ke, the required rate of return, goes up to 25 percent. what will be the new price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) New price $ c. Assume the growth rate (g) goes up to 14 percent. what will be the new price? Ke goes back to its original value of 22 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) New price $ d. Assume D1 is $4.50. what will be the new price? Assume Ke is at its original value of 22 percent and g goes back to its original value of 10 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) New price $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started