Compute the price of ecology labs common stock

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Reference no: EM131969453

Question: Ecology Labs Inc. will pay a dividend of $5.60 per share in the next 12 months (D1). The required rate of return (Ke) is 19 percent and the constant growth rate is 12 percent. (Each question is independent of the others.)

a. Compute the price of Ecology Labs' common stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. Assume Ke, the required rate of return, goes up to 22 percent. What will be the new price? (Do not round intermediate

c. Assume the growth rate (g) goes up to 15 percent. What will be the new price? Ke goes back to its original value of 19 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. Assume D1 is $6.40. What will be the new price? Assume Ke is at its original value of 19 percent and g goes back to its original value of 12 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM131969453

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