Find what will be the new price of the stock

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Reference no: EM131969470

Question: Ecology Labs, Inc., will pay a dividend of $2.90 per share in the next 12 months (D1). The required rate of return (Ke) is 15 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 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.) New price $

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 15 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) New price $

d. Assume D1 is $3.50. what will be the new price? Assume Ke is at its original value of 15 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: EM131969470

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