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Common stock value for Friedman Steel Company

Friedman Steel Company will pay a dividend of $1.50 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 Po (For all parts b, c and d in this problem all variables remain the same except the one specifically changed. each question is its own.)

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

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

d. Assume D1 is $2, what will be the new value of Po?

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Common stock value
Friedman Steel Company will pay a dividend of $1.50 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 Po
(For all parts b, c and d in this problem all variables remain the ...

Solution Summary

This solution is comprised of a detailed explanation and calculation to find Common stock value for Friedman Steel Company.

$2.19