5. Friedman steel company will pay a dividend of 1.50 per share in the next 12 months (D1). The required rate of return (ke) is 10 percent and the constant growth rate is 5 percent.

a. compute P0

( for parts b,c, and d in this problem all variables remain the same except the one specially changed. Each equation is independent of the others.

b. assume ke, the required rate of return, goes up to 12%; that will be the new value of P0?

c. assume the growth rate (g) goes up to 7 %; what will be the new value of P0?

d. assume D1 is $2, what will be the new value of P0?

I would like to know the formula s to use to answer eah question.

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Originally Posted by redman

5. Friedman stell company will pay a dividend of 41.50 per share in the nect 12 months (D1). The required rate of return (ke) is 10 percent and the constant growth rate is 5 percent.
a. compute P0
( for parts b,c, and d in this problem all variables remain the same except the one specially changed. Each equation in independent of the others.
b. assume ke, the required rate of return, goes up to 12%; that will be the new value of P0?
c. assume the growth rate (g) goes up to 7 %; what will be the new value of P0?
d. assume D1 is $2, what will be the new value of P0?

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5. Friedman stell company will pay a dividend of 41.50 per share in the nect 12 months (D1). The required rate of return (ke) is 10 percent and the constant growth rate is 5 percent.
a. compute P0
( for parts b,c, and d in this problem all variables remain the same except the one specially changed. Each equation in independent of the others.
b. assume ke, the required rate of return, goes up to 12%; that will be the new value of P0?
c. assume the growth rate (g) goes up to 7 %; what will be the new value of P0?
d. assume D1 is $2, what will be the new value of P0?