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The risk-free rate of return is 3 percent, and the expected return on the market is 6.6 percent. Stock A has a beta coefficient of
The risk-free rate of return is 3 percent, and the expected return on the market is 6.6 percent. Stock A has a beta coefficient of 1.5, an earnings and dividend growth b. rate of 3 percent, and a current dividend of $1.90 a share. Do not round intermediate calculations. Round your answers to the nearest cent. Should/Should Not a. What should be the market price of the stock? b. If the current market price of the stock is $12.00, what should you do? f. The increase in the return on the market: increases/decreases The stock -Select be purchased. C. If the expected return on the market rises to 13.3 percent and the other variables remain constant, what will be the value of the stock? $ the required return and: increases / decreases d. If the risk-free return rises to 5 percent and the return on the market rises to 13.9 percent, what will be the value of the stock? $ e. If the beta coefficient falls to 1.4 and the other variables remain constant, what will be 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: increase/decrease $ f. Explain why the stock's value changes in c through e. The increase in the return on the market -Select the required return and -Select- 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 -Select- v. LessMore The decrease in the beta coefficient causes the firm to become -Select- risky as measured by beta, which -Select- the value of the stock. Increase/Decrease
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