Question: Stock value vs. changes in r, and g D = $2, r, = 10%, and g = 5%: Po=D / (r-g) = $2 /

Stock value vs. changes in r, and g D = $2, r,

Stock value vs. changes in r, and g D = $2, r, = 10%, and g = 5%: Po=D / (r-g) = $2 / (0.10 -0.05) = $40. rs 9% 10% 11% 0 What if r, or g change? g 4% Po= 13% What would Po be if g = o? The dividend stream would be a perpetuity. 2.00 D 1 5% 2 g 2.00 6% 3 2.00

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