A company with the risk free rate of return RF is 18%. The predictable rate of return on the

market portfolio RM is 26%. The predictable rate of growth for the dividend of firm A is 14%.

The last dividend paid on the equity stock of firm A was Rs 4.00. The beta of firm A's equity

stock is 2.4

a) What is the equilibrium/stability value of the equity stock of firm A?

b) If the equilibrium/stability price deviates when (i) the inflation premium increases by 4%,

(ii) the expected growth rate increases by 6% and (iii) the beta of A's equity rises to 2.6