Eli is expected to pay a dividend of $2.00 per share that is expected to grow at the rate of 8% per year for the foreseeable future. The investor demands 12% rate of return for similar risk investment.

a)Determine the price at which you would expect the common stock of Eli to sell?

b)The management is considering changing the dividend for the next year to be $2.10.The effect of the new increased dividend will be to reduce its future growth from 8% to 6% for the foreseeable future.Determine the impact on the stock price for Eli.

c) Briefly discuss the management decision of dividend versus investment and its implications.