Problem: 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.
Q1. 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.)
Q2. Assume Ke, the required rate of return, goes up to 12 percent; what will be the new value of Po?
Q3. Assume the growth rate (g) goes up to 7 percent; what will be the new value of Po?
Q4. Assume D1 is $2, what will be the new value of Po?