The blue stair-step line depicts the value of future stock dividends. The orange staif-step line dopicts the present valuo of those future dividends discounted by r. for a slock with initial dividend D0=$1.15 and an anticipated growth rate of g=4%. Use the slider to change rg and observe the corresponding changes in the nquilitinam price of the stock. P^0=t=1PVDt=r1gD0(1+g)=0.080.04$1.15(1+0.04)=$29.90 1. If r1 incieases to 10%, what woud be the value of the conctant growth steck? (Note. 0. is $1.15 and the expected constant growth rate 0 a sts ) a. $29.90 b. 519.93 c. 410.67 d. Hodetermined 2. When re increases fram, say, 8% to 10%, the value of the constant growth stock: a. Increaces because the interest rate is higher, b. Decreases because its dividends are being discounted at a higher rate. c. Remains the same because it is a constant growth" soock d. Might either increase or decreace. 3. Move the slider so thet is is 12%. If the stock were sesing on the market for $15.50, would you buy it? (Notet Dy is $1.15 and the eapected growth carsstant rate g = 4.1.) a. Yes, it is a barpain. b. No, the stock is overvalued, as the expected steck orice is only, 514.95. c. Not enbugh information to determine whether it would be a good buy. 4. The slider for rn is limited to a minimum of 4.1% so that n is alsays greater than g. Movn the tilter to the minimum and observe how the present verve of the stock changes. Must is be greater than g2 ? a. No resson fe neees to be greater than g because the formuls adjusts the value of the stock appropriately. b. Yes, because it 6 were not greater than 9 , then the graph would be ton large to display easily. c. Yes, because if r; =9, then the formula dluises by reeo, producing an infinte value