Compute the price of ecology labs common stock

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Reference no: EM131994683

Ecology Labs Inc. will pay a dividend of $3.75 per share in the next 12 months (D₁). The required rate of return (K_e) is 16 percent and the constant growth rate is 6 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.)

price:

b. Assume K_e, 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.)

new price:

c. Assume the growth rate (g) goes up to 10 percent. What will be the new price? K_e goes back to its original value of 16 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

new price:

d. Assume D₁ is $5.00. What will be the new price? Assume K_e is at its original value of 16 percent and g goes back to its original value of 6 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

new price:

Reference no: EM131994683

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