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The risk - free rate of return is 2 percent, and the expected return on the market is 8 . 5 percent. Stock A has
The riskfree rate of return is percent, and the expected return on the market is percent. Stock A has a beta coefficient of an earnings and dividend growth rate of percent, and a 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 doThe stockshould or should not, choose onebe 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 stocks value changes incthrougheThe increase in the return on the marketincreases or decreases, choose one.the required return andincreases or decreaseschoose one 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 toincrease or decrease, choose one.The decrease in the beta coefficient causes the firm to becomeless or more choose one.risky as measured by beta, whichincreases or decreases, choose one.the value of the stock.
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