REH? Corporation's most recent dividend was $ 2.56 per? share,its expected annual rate of dividend growth is 5?%, and therequired return is now 15?%. A variety of proposals are beingconsidered by management to redirect the? firm's activities.Determine the impact on share price for each of the followingproposed actions.
a.??Do? nothing, which will leave the key financial variablesunchanged.
b.??Invest in a new machine that will increase the dividendgrowth rate to 9?% and lower the required return to 11?%.
c.??Eliminate an unprofitable product? line, which will increasethe dividend growth rate to 9?% and raise the required return to19%.
d.??Merge with another? firm, which will reduce the growth rateto 2?% and raise the required return to 19?%.
e. Acquire a subsidiary operation from another manufacturer. Theacquisition should increase the dividend growth rate to??8% andincrease the required return to 19?%.
