Management action and stock value REH Corporation's most recent dividend was $1.79 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of...

Answer d and e

Extracted text: Management action and stock value REH Corporation's most recent dividend was $1.79 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each Expecte of the following proposed actions. a. Do nothing, which will leave the key financial variables unchanged. b. Invest in a new machine that will increase the dividend growth rate to 7% and lower the required return to 13%. c. Eliminate an unprofitable product line, which will increase the dividend growth rate to 9% and raise the required return to 16%. d. Merge with another firm, which will reduce the growth rate to 2% and raise the required return to 16%. e. Acquire a subsidiary operation from another manufacturer. The acquisition should increase the dividend growth rate to 8% and increase the required return to 16%. Part b: Comput Expecte .5%= $4. .. (Round to the nearest cent.). C. If the firm eliminates an unprofitable product line that will increase the dividend growth rate to 9% and raise the required return to 16%, the value of the firm will be $ 27.87. (Round to the nearest cent.). Step 3 d. If the firm merges with another firm that will reduce the growth rate to 2% and raise the required return to 16%, the value of the firm will be $ nearest cent.) (Round to the Part c: Comput e. If the firm acquires a subsid1ary operation from another manufacturer that will increase the dividend growth rate to 8% and increase the required return to 16%, (Round to the nearest cent.) Differen = $6. the value of the firm will be $