$($Measuring growth$)$ Solarpower Systems earned $$20$ per share at the beginning of the year and paid out $$8$ in dividends to shareholders $($so$,D_0=$$$8)$ and retained $$12$ to invest in new projects with an

expected return on equity of $19$ percent. In the future, Solarpower expects to retain the same dividend payout ratio, expects to earn a return of $19$ percent on its equity invested in new projects, and will not

be changing the number of shares of common stock outstanding.

a$.$ Calculate the future growth rate for Solarpower's earnings.

b$.$ If the investor's required rate of return for Solarpower's stock is $14$ percent, what would be the price of Solarpower's common stock?

c$.$ What would happen to the price of Solarpower's common stock if it raised its dividends to $$14$ and then continued with that same dividend payout ratio permanently? Should Solarpower make

this change? $($Assume that the investor's required 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 $$4$ and then continued with that same dividend payout ratio permanently? 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 $14$ percent and that all future new projects will earn $19$ percent.$)$

a$.$ What is the future growth rate for Solarpower's earnings?

$6($Round to two decimal places.$)$

b$.$ If the investor's required rate of return for Solarpower's stock is $14\%,$ what would be the price of Solarpower's common stock?

$($Round to the nearest cent.$)$

c$.$ What would happen to the price of Solarpower's common stock if it had raised its dividends to $$14(D_0=$$$14)$ and then continued with that same dividend payout ratio permanently?

$ $($Round to the nearest cent.$)$

Should Solarpower make this change? $($Select from the drop$-$down menus.$)$

Solarpower

raise its dividend because the retention ratio will

and the value of the common stock will

d$.$ What would happen to the price of Solarpower's common stock if it had lowered its dividends to $$4(D_n=$$$4)$ and then continued with that same dividend pavout ratio permanentlv?