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Company Q has earnings of $3.00 per share, a market price of $25, and a beta of 1.25. The risk-free rate is 3% and the

Company Q has earnings of $3.00 per share, a market price of $25, and a beta of 1.25. The risk-free rate is 3% and the risk premium for the market as a whole is 5%.

  1. What is the current rate of return for investing in Company Q?
  2. What is the current "reward-to-risk ratio" for Company Q?
  3. If the market remains stable, what will the expected return eventually become for Company Q?
  4. At this new expected return for Company Q, what will be its new stock price?

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