The current dividend, D0, of the stock of Sun Devil Corporation is $3 per share. Under present conditions, this dividend is expected to grow at a rate of 5 percent annually for the foreseeable future. The beta of Sun Devil stock is 1.7. The risk-free rate of return is 9 percent, and the expected market rate of return is 12 percent. Round your answers to the nearest cent.

1. At what price would you expect Sun Devil common stock to sell?
2. $
4. If the risk-free rate of return declines to 7 percent, what will happen to Sun Devil's stock price? (Assume that the expected market rate of return remains at 12%, the dividend growth rate remains at 5%, and D0remains at $3.)
5. $
7. Sun Devil's management is considering acquisitions in the machine tool industry. Management expects the firm's beta to increase to 2 as a result of these acquisitions. The dividend growth rate is expected to increase to 7 percent annually. Would you recommend this acquisition program to management? (Assume the same initial conditions that existed in part a.)
8. Based on stock price of $, the acquisition program-Select-
9. should
10. should not
11. Item 4
12. be recommended.