The risk-free rate of return is 3 percent, and the expected return on the market is 7 percent. Stock A has a beta coefficient of 1.3, an earnings and dividend growth rate of 5 percent, and a current dividend of $2.10 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 $91.00, what should you do? The stock -Select-shouldshould notItem 2 be purchased. If the expected return on the market rises to 13.1 percent and the other variables remain constant, what will be the value of the stock?
The risk-free
- What should be the market price of the stock?
$
- If the current market price of the stock is $91.00, what should you do?
The stock -Select-shouldshould notItem 2 be purchased.
- If the expected return on the market rises to 13.1 percent and the other variables remain constant, what will be the value of the stock?
$
- If the risk-free return rises to 4.5 percent and the return on the market rises to 13.9 percent, what will be the value of the stock?
$
- If the beta coefficient falls to 1.2 and the other variables remain constant, what will be the value of the stock?
$
- Explain why the stock’s value changes in c through e.
The increase in the return on the market -increases/decreases the required return and -Select-increasesdecreasesItem 7 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
The decrease in the beta coefficient causes the firm to become -Select-lessmoreItem 9 risky as measured by beta, which --increases/decreases the value of the stock.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
