Question: Host Corp. will pay a $2.40 dividend (D1) in the next 12 months. The required rate of return (K e) is 13 percent and the constant growth rate (g) is 5 percent.
a. Compute the stock price (P0).
b. If K e goes up to 15 percent, and all else remains the same, what will be the stock price (P0)?
c. Now assume in the next year, D 1 = $2.70, K e = 12 percent, and g is equal to 6 percent. What is the price of the stock?