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Problem 11-06 The risk-free rate of return is 2 percent, and the expected return on the market is 6.7 percent. Stock A has a beta
Problem 11-06 The risk-free rate of return is 2 percent, and the expected return on the market is 6.7 percent. Stock A has a beta coefficient of 1.2, an earnings and dividend growth rate of 4 percent, and a current dividend of $2.70 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 $54.00, what should you do? The stock -Select be purchased. C. If the expected return on the market rises to 8.3 percent and the other variables remain constant, what will be the value of the stock? $ d. If the risk-free return rises to 3 percent and the return on the market rises to 8.7 percent, what will be the value of the stock? $ e. If the beta coefficient falls to 1.1 and the other variables remain constant, what will be the value of the stock? $
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