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The risk-free rate of return is 2 percent, and the expected return on the market is 7.2 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 7.2 percent. Stock A has a beta coefficient of 1.7, an eamings and dividend growth rate of 5 parant, and a current dividend of $3.00 a share. Do not round intermediate calculations. Round your anowers to the nearest cent a. What should be the market price of the stock? b. If the current market price of the stock is $36.00, what should you do? be purchased The stock -Select c. If the expected retun on the market rises to 14.2 percent and the other variables remeen constent, whst wil be the valae of the stock? $ d. If the risk-free return rises to 4.5 percent and the retun on the market rises to 152 percent, what will be the value of the stock? e. If the beta coefficient falls to 1.6 and the other varisbles reman constant, what will be the value of the stock? f. Explain why the stock's value changes in e through e the value of the stock the required returm and Sele The increase in the return on the market i-Selem The increase in the risk-free rate and the simultaneous increase i the retum on the market ceuse the value of the stock.toSel the value of the stock roky as measured by beta, which Seec The decrease in the beta coefficient causes the firm to becomeS
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