Problem 10-33 Common stock required rate of return [LO10-5]

A firm pays a $1.50 dividend at the end of year one (D₁), has a stock price of $155 (P₀), and a constant growth rate (g) of 10 percent. a. Compute the required rate of return (K_e). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Indicate whether each of the following changes will increase or decrease the required rate of return (K_e). (Each question is separate from the others. That is, assume only one variable changes at a time.) No actual numbers are necessary. b. If the dividend payment increases:

c. If the expected growth rate increases:

d. If the stock price increases: