Question
The risk-free rate of return is 2 percent, and the expected return on the market is 7.8 percent. Stock A has a beta coefficient of
The risk-free rate of return is 2 percent, and the expected return on the market is 7.8 percent. Stock A has a beta coefficient of 1.7, an earnings and dividend growth rate of 7 percent, and a current dividend of $3.00 a share. Do not round intermediate calculations. Round your answers to the nearest cent.
If the beta coefficient falls to 1.4 and the other variables remain constant, what will be the value of the stock?
$___________
Explain why the stocks value changes in c through e.
The increase in the return on the market ______ the required return and ______ the value of the stock.
The increase in the risk-free 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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started