(Measuring growth) Solarpower $ystems earned $20 per share at the beginning of the year and paid out $10 in dividends to shareholders (so, D0=$10 ) and retained $10 to invest in new projocts with an expected return on equity of 21 percent. In tho future, Solarpower expocts to retain the same dividend paycat ratio, expects to earn a return of 21 percent on its equity irwested 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 eainings. b. If the investor's requifed rate of return for Solarpower's stock is 14 percont, what would be the price of Solarpower's common slock? c. What would happen to the price of Solarpower's common stock if it rasod its dividends to $13 and then continued with that same dividend payout rabio permanently? Should Solarpower mako 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 is dividends to $3 and then continuod with that same dividend payout: ratio permanontly? Does the constant dividend growth rate model work in this case? Why or why not? (Assume that the investor's required rate of refurn remains at 14 percent and that ail future new projocts will earn 21 percent) a. What is the future growth fate for Solarpower's eamings? (Measuring growth) Solarpower Systems eamed $20 per share at the beginning of the year and paid out $10 in dividends to shareholders ( 50,D0=$10 ) and retained $10 to imvest in new projects with an expected return on equity of 21 percent. In the future, Solarpower expocts to retain the same dividend payout ratio, expecis to earn a return of 21 percent on its equity imvested in new projects, and will not be changing the number of shares of common stock outstanding a. Calculate the future growh rate for Solarpower's earnings b. If the imvestor'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 price of Solarpower's common stock if it raisod its dividends to $13 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 porcent) d. What would happened to the price of Solarpower's common stock if it lowerod its dividends to $3 and thion continuod 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 requirod rate of rolum remains as 14 percent and that all future new projects will earn 21 percent) a. What is the future growth rate for Solarpower's eamings? 18. (Round to tho decimat places)
