Saskatchewan River Enterprises (SRE) has

$700700

million in debt and

1010

million shares of equity outstanding. Its excess cash reserves are

$2525

million. SRE is expected to generate

$300300

million in free cash flows next year with a growth rate of 2% per year in perpetuity. SRE's cost of equity capital is

1212%.

a. What is SRE's stock price?

b. After analyzing the company, you believe that the growth rate should be 3% instead of 2%. Assume debt and cash values do not change. What should the stock price be, given the higher growth rate?

c. Given the growth rate change from 2% to 3%, how can you calculate the change in stock price without calculating the amounts in a or b above?