Problem $11-01$

The dividend$-$growth model may be used to value a stock:

$V=\frac{D_0(1+g)}{k-g}$

Round your answers to the nearest cent.

a$.$ What is the value of a stock if:

$D_0=$$$5\mathrm{.}00$

$k=10\%$

$g=6\%$

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b$.$ What is the value of this stock if the dividend is increased to $$6\mathrm{.}70$ and the other variables remain constant?

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c$.$ What is the value of this stock if the required return declines to $7$ percent and the other variables remain constant?

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d$.$ What is the value of this stock if the growth rate declines to $4$ percent and the other variables remain constant?

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e$.$ What is the value of this stock if the dividend is increased to $$6\mathrm{.}20,$ the growth rate declines to $4$ percent, and the required return remains $10$ percent?

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