4. At its next quarterly meeting, the Federal Reserve Board may increase the money supply, which could cause a fall in the risk-free rate and required rate of return on the market. On the other hand, a new administration may be in power after the next election, and this could cause an increase in investors' risk aversion and hence a higher risk-free rate and required rate of return on the market. Pacific Healthcare will soon sign several new lucrative contracts that could increase the expected constant growth rate, nonconstant growth rate, or current dividend (D0). Pacific Healthcare also has plans to stabilize revenues and profits in several of its large hospitals and this could cause the beta coefficient to decline. For these reasons, Marcia wants to know the sensitivity of the December 31, 2017, estimated value of Pacific Healthcare stock to changes in each model variable.

a. Graph the December 31, 2017, estimated value of Pacific Healthcare stock at +/- 10%, 20%, and 30% changes in each of the model variables (six lines on the graph, one for each variable).

b. To which variables is the estimated value most sensitive?