Problem 9-12 Valuation of a constant growth stock urses E UNLIMITED rowse Catalog Partner Offers Investors require a 16% rate of return on Levine Company's stock (le, ls -16%). a. What is its value if the previous dividend was Do - $3.75 and investors expect dividends to grow at a constant annual rate of (1) C ON, NO (4) 12% Round your answers to two decimal places (1) $ (2) $ (3) $ (4) b. Using data from part a, what would the Gordon (constant growth) model value be the required rate of retum was 15 and the expected growth rate were (1) 15% or (2) 20%? Are these reasonable results? Print Options College Success Career Center 1. The results show that the formula does not make sense of the required rate of return is equal to or greater than the expected growth rate. 11. The results show that the formula makes sense the required rate of return is equal to or less than the expected growth rate. II. The results show that the formula makes sense if the required rate of return is equal to or greater than the expected growth rate. IV. These results show that the formula does not make sense of the expected growth rate is equal to or less than the required rate of return V. The results show that the formula does not make sense if the required rate of return is equal to or less than the expected growth rate. Help Give Feedback Is it reasonable to think that a constant growth stock could have RECOMMENDED FOR YOU It is not reasonable for a firm to grow indefinitely at a rate lower than is required return IL. It is not reasonable for a firm to grow indefinitely at a rate equal to its required return I t is not reasonable for a fum te grow indefinitely at a rate higher than its required retum TV. It is reasonable for a fumtorowid e ly at a rate higher than its required return V. It is not reasonable for arm to grow even for a short period of time at a rate higher than its required retum, Liquid Assets Check by Work remaining)