Friedman Steel Company will pay a dividend of $1.50 per sharein the next 12 months (D1). The required rate of return (Ke) is 10percent and the constant growth rate is 5 percent.
a.Compute P0. (For parts b, c, and d in this problem all variables remain the same except the one specifically changed. Each question is independent of theothers.)
b. Assume Ke, the required rate of return, goes up to 12percent; what will be the new value of P0?
c. Assume the growth rate (g) goes up to 7 percent; whatwill be the new value of P0?
d. Assume D1 is $2, what will be the new value of P0?