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Problem 1 1 - 0 6 current dividend of $ 2 . 2 0 a share. Do not round intermediate calculations. Round your answers to
Problem current dividend of $ a share. Do not round intermediate calculations. Round your answers to the nearest cent.
a What should be the market price of the stock?
$
b If the current market price of the stock is $ what should you do
The stock be purchased.
c If the expected return on the market rises to percent and the other variables remain constant, what will be the value of the stock?
$
d If the riskfree return rises to percent and the return on the market rises to percent, what will be the value of the stock?
$
e If the beta coefficient falls to and the other variables remain constant, what will be the value of the stock?
$
f Explain why the stock's value changes in c through
The increase in the return on the market J the required return and the value of the stock.
The increase in the riskfree rate and the simultaneous increase in the return on the market cause the value of the stock to
The decrease in the beta coefficient causes the firm to become risky as measured by beta, which the value of the stock.
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