Investors require a 12% rate of return on Brooks Sisters' stock (r_s = 12%).

1. What would the estimated value of Brooks' stock be if the previous dividend was D₀ = $1.25 and if investors expect dividends to grow at a constant annual rate of (1) - 7%, (2) 0%, (3) 5%, or (4) 10%? Do not round intermediate calculations. Round your answers to the nearest cent.

   1. $

   2. $

   3. $

   4. $

2. Using data from Part a, what is the constant growth model's estimated value for Brooks Sisters' stock if the required rate of return is 12% and the expected growth rate is (1) 12% or (2) 13%? Are these reasonable results? Round your answers to the nearest cent. Use a minus sign to enter negative values, if any. If your answer is zero, enter "0".
   1. : $ -Select-Yes, it is a reasonable result.No, it is not a reasonable result, because in this case the value of stock is undefined.No, it is not a reasonable result, because in this case the value of stock is negative, which is nonsense.Item 6
   2. : $ -Select-Yes, it is a reasonable result.No, it is not a reasonable result, because in this case the value of stock is undefined.No, it is not a reasonable result, because in this case the value of stock is negative, which is nonsense.Item 8
3. Is it reasonable to expect that a constant growth stock would have g_L > r_s? -Select-YesNoItem 9