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A company will pay a dividend of $1.50 per share in the next 12 months (D1). The required rate of return (Ke) is 10% and the constant growth rate is 5%.
a. compute Po?
(for b,c,d all variables remain the same except the specific one changed. each question is independent of others)
b. assume Ke, the required rate of return goes up to 12%, what will be the new value of Po?
c. assume the growth rate (g) goes up to 7%, what is new value of Po?
d. assume D1 is $2, what is new value of Po?