Investors required a 12% rate for turn on Brook Corporation stock (rs = 12%).

a. What would the estimate value of Brooks stock be if the dividend the firm just paid was D0 = $1.50 and if investors expect future dividends to grow at a constant annual rate of (1) 4%; (2) 0%; (3) 4%; (4) 10%?

b. Using the data from Part (a), what is the constant growth models estimated value for Brooks stock if the required rate of return is 12% and the expected growth rate is (1) 12% or (2) 15%? Are these reasonable results? Explain.

c. Is it reasonable to expect a constant growth stock would have GL > RS?