Milton Glasses recently paid a dividend of $1.70 per share, iscurrently expected to grow at a constant rate of 5%, and has arequired return of 11%. Milton Glasses has been approached to buy anew company. Milton estimates if it buys the company, its constantgrowth rate would increase to 6.5%, but the firm would also beriskier, therefore increasing the required return of the company to12%. Should Milton go ahead with the purchase of the newcompany?

Yes, because the value of the Milton Co. will increase by $3.17per share

Yes, because the value of the Milton Co. will increase by $2.56per share

Yes, because the value of the Milton Co. will increase by $4.59per share

No, because the value of the Milton Co. will decrease by $3.17per share

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