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