# What would happen to the stock price if investors

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What would happen to the stock price if investors required a higher return of 15%? (Why would they need a higher return?)
What is the value of CS w/ a current (or recently paid) dividend of \$3.00, a growth rate of 10% when investors require a return of 15%?
What is the required return for CS that has a current dividend of \$3.00, a projected growth rate of 15% that is selling for \$70?
What’s the required return if the stock is selling for \$55 a share?
7. Variable Growth Rate Model: VCS = PV dividends + PV future stock priceWhat is the following stock worth to an investor?Current dividend is \$2.55Projected 3 yr. super normal growth rate of 25%Growth rate after yr. 3 to fall and remain constant at 10%Required return of 15%SV 3
Step 1: PV dividends during the initial growth period tDoFVIFDtPVIFPvdiv12.551.2503.19.870\$2.7822.551.5623.98.756 \$3.0132.551.9534.98.658\$3.28\$9.07Step 2: FV of the stock after the initial growth period Dividend in yr. 4 = 4.98 (1 + .10) =VCS = 5.48/(.15 - .10) = \$ 109.60Step 3: PV of the future stock price109.60 (PVIF 15%, 3 yrs. = .658)= \$72.12Step 4: Current value of the stock \$9.07 + \$72.12 = \$ 81.19
What would an investor be willing to pay for the following stock?
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