Would shareholders want management to make the change

Reference no: EM131959204

Question: Your company just paid a dividend of $3. Management of your company wants to expand with a new product line. This would cause your company's constant growth rate in earnings and dividends to rise from 5% to 7%. Currently, the require rate of return for your company is 10%. This expansion would cause the required rate of return to increase to 13%, due to additional risk. Would shareholders want management to make this change? (Hint, P0). Show calculations to support your answer for full credit.

Reference no: EM131959204

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