Question: REH Corporation's most recent dividend was $1.92 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of propsals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following proposed actions.
a. If the firm does nothing that will leave the key financial variables unchanged, the value of the firm will be $___ (Round to the nearest cent.)
b. Invest in a new machine that will increase the dividend growth rate to 7% and lower the required return to 12%
c. Eliminate an unprofitable product line, which will increase the dividend growth rate to 8% and raise the required return to 16%
d. Merge with another firm, which will reduce the growth rate to 3% and raise the required return to 19%
e. Accquire a subsidiary operation from another manufacturer. The acquisition should increase the dividend growth rate to 9% and increase the required return to 16%