IntegrativeRisk

and valuationGiant Enterprises' stock has a required return of

14.1%.

The company, which plans to pay a dividend of

$2.24

per share in the coming year, anticipates that its future dividends will increase at an annual rate consistent with that experienced over

2016-2022

period, when the following dividends were paid:

LOADING...

.a.If the risk-free rate is

5%,

what is the risk premium on Giant's stock?b.Using the constant-growth model, estimate the value of Giant's stock.

(Hint:

Round the computed dividend growth rate to the nearest whole percent.)

c.Explain what effect, if any, a decrease in the risk premium would have on the value of Giant's stock.