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.

What should be the market price of the stock?

$ _____

If the current market price of the stock is $87.00, what should you do?

The stock ___ be purchased.

If the expected return on the market rises to 14.8 percent and the other variables remain constant, what will be the value of the stock?

$_______

If the risk-free return rises to 4 percent and the return on the market rises to 15.7 percent, what will be the value of the stock?

$_______

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.