# What is the new price of Ecology Labs, Inc. shares?

Not what you're looking for?

Problem 10/22.

Ecology Labs, Inc., will pay a dividend of $3 per share in the next 12 months (D1). The required rate of return (Ke) is 10 percent and the constant growth rate is 5 percent.

a. Compute P0.

(In the remaining questions for problem 22 all variables remain the same except the one specifically changed. Each question is independent of the others.)

b. Assume Ke, the required rate of return, goes up to 12 percent; what will be the new value of P0?

c. Assume the growth rate (g) goes up to 7 percent; what will be the new value of P0?

d. Assume D1 is $3.50; what will be the new value of P0?

##### Purchase this Solution

##### Solution Summary

This solution uses the constant growth model in its calculations to determine the price of the stock.

##### Solution Preview

The constant growth model or the Gordon Growth Model states that the price of the stock is given by: D1/(Ke -g), where r is the constant ...

##### Purchase this Solution

##### Free BrainMass Quizzes

##### Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

##### Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

##### Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

##### Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

##### Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.