Reference no: EM131867735

Management action and stock value. REH? Corporation's most recent dividend was $1.56 per? share, its expected annual rate of dividend growth is 5?%, and the required return is now 15?%. A variety of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following proposed actions.

a. Do? nothing, which will leave the key financial variables unchanged.

b. Invest in a new machine that will increase the dividend growth rate to 6% and lower the required return to 12%.

c. Eliminate an unprofitable product? line, which will increase the dividend growth rate to 9% and raise the required return to 18%.

d. Merge with another? firm, which will reduce the growth rate to 1% and raise the required return to 18%.

e. Acquire a subsidiary operation from another manufacturer. The acquisition should increase the dividend growth rate to 8% and increase the required return to 18?%.

a) If the firm does nothing that will leave the key financial variables? unchanged, the value of the firm will be ?$_

b) If the firm invests in a new machine that will increase the dividend growth rate to 6% and lower the required return to 12%, the value of the firm will be ?$ _. (Round to the nearest? cent.)

c) If the firm eliminates an unprofitable product line that will increase the dividend growth rate to 9% and raise the required return to 18%?, the value of the firm will be ?$_. ?(Round to the nearest? cent.)

d) If the firm merges with another firm that will reduce the growth rate to 1% and raise the required return to 18%, the value of the firm will be ?$_. ?(Round to the nearest? cent.)

e) If the firm acquires a subsid1ary operation from another manufacturer that will increase the dividend growth rate to 8% and increase the required return to 18?%, the value of the firm will be $_. (Round to the nearest? cent.)