A. The present investors' required rate of return at a share price of $50.00 and an annual dividend of $2.50 is 5%. Using the perpetual annuity model, it is calculated as $2.50 / $50.00, which is .05.If the investors' required rate of return increases to 8%, the equation to solve to calculate the new share price is $2.50 / X = .08. Solving for X, we get X = $31.25, and that will be the new share price.

B. The share price will adjust so that purchasers of the stock will receive a return of 8% on their investment.

C. The current investors' required rate of return for this stock is 5%, calculated as $2.50 / $50.00. If the investors' required rate of return increases to 8%, the price of a share of stock will go down, not up.

D. A stock's dividend does not automatically change just because its investors' required rate of return changes.