Wagner Widgets is a mature firm in the machine tool component industry. The firm's most recent common stock dividend was $4.75 per share. Because of its maturity as well as its stable sales and earnings, the firm's management feels that dividends will grow at a constant rate of 3% for the foreseeable future.

1. If the required return is 12%, what will be the value of Scotto's common stock?
2. If the firm's risk as perceived by market participants suddenly increases, causing the required return to rise to 15%, what will be the common stock value?
3. Judging on the basis of your findings in parts a and b, what impact does risk have on value? Explain.