12.4 Assume the risk-free rate is 6 percent and the market risk premium is 6 percent. The stock of Physicians Care Network (PCN) has a beta of 1.5. The last dividend paid by PCN (D0) was $2 per share. a. What would PCNs stock value be if the dividend was expected to grow at a constant:

5 percent?

0 percent?

5 percent?

10 percent?

b. What would be the stock value if the growth rate is 10 percent, but PCNs beta falls to

1.0?

0.5?