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Carlson Products, a constant growth company, has a current stock price of $20.00. Carlson's next dividend, D1, is forecasted to be $2.00, and is expected
Carlson Products, a constant growth company, has a current stock price of $20.00. Carlson's next dividend, D1, is forecasted to be $2.00, and is expected to grow at an annual rate of 6%. Carlson has a beta coefficient of 1.2, and the market risk premium is 5%. As Carlson's financial manager, you have access to insider information concerning a switch in product lines that would not change the growth rate, but would cut Carlson's beta coefficient in half. If you buy the stock at the current market price, what is your expected percentage capital gain? Answer 23% 33% 43% 53% There would be a capital loss
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