Problem 5: P7-21; Page 340 Management action and stock value (20 points) Similar to P7-8 Po = D./ir-g) a. PO = $3.15 + (0.15 -0.05) = $31.50 (Example) $3.00 x growth of .05 = .15, Add to $3.00 = $3.15 then divide by (r-g) b. PO = D/(r-g) Step 1 $3.00 x growth of .06 = ???; add that number to the $3.00 base; that is the D for the formula D = Next divide D number by the (r-g) which is .14 - 06 Formula is D/1.14-.06) For each remaining alternative C, D, E use the same formula You will need to solve for D first, then (r-g); each alternative has a different D, r and g C. PO =