Question
The risk-free rate of return is 4 percent, and the expected return on the market is 7.5 percent. Stock A has a beta coefficient of
The risk-free rate of return is 4 percent, and the expected return on the market is 7.5 percent. Stock A has a beta coefficient of 1.7, an earnings and dividend growth rate of 6 percent, and a current dividend of $3.40 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 expected return on the market rises to 10.9 percent and the other variables remain constant, what will be the value of the stock?
$ = ?
If the risk-free return rises to 7 percent and the return on the market rises to 11.2 percent, what will be the value of the stock?
$ = ?
If the beta coefficient falls to 1.5 and the other variables remain constant, what will be the value of the stock?
$ = ?
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