Compute the price of ecology labs common stock

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Ecology Labs Inc. will pay a dividend of $4.60 per share in the next 12 months (D1). The required rate of return (Ke) is 17 percent and the constant growth rate is 7 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 19 percent. What will be the new price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Assume the growth rate (g) goes up to 9 percent. What will be the new price? Ke goes back to its original value of 17 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Assume D1 is $6.00. What will be the new price? Assume Ke is at its original value of 17 percent and g goes back to its original value of 7 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) HintsReferenceseBook & Resources WorksheetDifficulty: AdvancedLearning Objective: 10-05 Stock valuation is based on determining the present value of the future benefits of equity ownership. Check my work ©2017 McGraw-Hill Education. All rights reserved.

Reference no: EM131456581

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