The Lo Company earned $ 2.60 per share and paid a dividend of $ 1.30 per share in the year just ended. Earnings and dividends per share are expected to grow at a rate of 5 percent per year in the future. Determine the value of the stock:
a. if the required rate of return is 12 percent.
b. if the required rate of return is 15 percent.
c. Given your answers to ( a) and ( b), how are stock prices affected by changes in investor's required rates of return?