(Measuring growth) Solarpower Systems eamed $20 per share at the beginning of the year and paid out $8 in dividends to sharehoiders (so, D0=$8 ) and retained $12 to invest in new projects with an expected return on oquity of 21 percont. In the future, Solarpower expects to tetain the same dividend payout ratio, expects to earn a roturn of 21 percent on its equily investod in new projocts, and will not be changing tho number of shares of common stock outstanding: a. Calculate the future growh rate for Solarpowor's earnings b. If the investor's required rate of return for Solarpower's stock is 14 percent, what would bo the price of Solarpower's common stock? c. What would happen to the prlco of Solarpower's common stock it if raised its dividends to $14 arid then continued with that same dividend payout ratio permanenty? Should Solarpower make this change? (Assume that the invostor's roquirod rate of return remains at 14 percent) d. What would happened to the price of Solarpower's common stock if it lowered its dividends to $2 and then continued with that same dividend payout ratio pormanently? Does the constant dividend growth rate model work in this case? Why or why not? (Assume that the investor's required rate of return remains at 14 percont and that all future new projects will earn 21 porcent.) 126% (Round to two decimal places.) b. It the investore requined rate of return fot Solarpower's stock is 14%, what would be the price of Solaipower's common stock? (Pound lo the nearest cent.) c. What would happon to the price of Solarpower's common stock it it had raised its dividends to $14(D0=$14) and then continued with that same dividend payout ratio pecrmanently? (Round to the nearest cont) (Measuring growth) Solarpower Systems eamed $20 per share at the beginning of the year and paid out $8 in dividends to sharehoiders (so, D0=$8 ) and retained $12 to invest in new projects with an expected return on oquity of 21 percont. In the future, Solarpower expects to tetain the same dividend payout ratio, expects to earn a roturn of 21 percent on its equily investod in new projocts, and will not be changing tho number of shares of common stock outstanding: a. Calculate the future growh rate for Solarpowor's earnings b. If the investor's required rate of return for Solarpower's stock is 14 percent, what would bo the price of Solarpower's common stock? c. What would happen to the prlco of Solarpower's common stock it if raised its dividends to $14 arid then continued with that same dividend payout ratio permanenty? Should Solarpower make this change? (Assume that the invostor's roquirod rate of return remains at 14 percent) d. What would happened to the price of Solarpower's common stock if it lowered its dividends to $2 and then continued with that same dividend payout ratio pormanently? Does the constant dividend growth rate model work in this case? Why or why not? (Assume that the investor's required rate of return remains at 14 percont and that all future new projects will earn 21 porcent.) 126% (Round to two decimal places.) b. It the investore requined rate of return fot Solarpower's stock is 14%, what would be the price of Solaipower's common stock? (Pound lo the nearest cent.) c. What would happon to the price of Solarpower's common stock it it had raised its dividends to $14(D0=$14) and then continued with that same dividend payout ratio pecrmanently? (Round to the nearest cont)
