Answer:
The pric eof the stock today us $77.12
Explanation:
The two stage dividend growth model of DDM will be used to calculate the price of the stock today. The formula for two stage growth model is:
Price today = D1 / (1+r) + D2 / (1+r)^2 + ... + [(Dn / r - g) / (1+r)^n]
Price today = 3 / (1+0.06) + + 3 * (1+0.05) / (1+0.06)^2 + [(3 * (1+0.05) * (1+0.02) / 0.06 - 0.02) / (1+0.06)^2]
Price today = $77.12
Answer: Increase by $250
Explanation: As per the general rule of economics when there is an increase in income, that increase will eventually lead to increase in expenditure.
As, there is an increase in investment in the given case so it will result in increase in income for the economy.
We can compute it as :-
= $250
Therefore, the expenditure would increase by $250