Problem 11-06

question b (should or should not)

question f (increase or decrease) -----(increase or decrease)

next line (increase or decrease)

next line (less or more) ----(increase or decrease)

6 % O Q E lrttps'ng.cengagetumjstacfnbjuHem/index.html?deployment|d=5944072237501343542 5961 6573198195 BN=9781 337m3047&nb|d :1 8261 arsna pshotlr .1: CENGAGE I MINDTAP Q Search this course 0 Ch 11: End-ofChapter Problems - Stock Valuation o x I A Problem 11-06 m idend growth rate of 5 percent, and a The riskefree rate of return is 3 percent, and the expected return on the market is 7.5 percent. Stock A has a beta coefcient at 1.7, an earnings and d current dividend of $2.40 a share. Do not round intermediate calculations. Round your answers to the nearest cent. a. what should be the market price of the stock?| i b. If the current market price of the stock is $61.00, what should you do? __ The stock Select v be purchased. c. If the expected return on the market rises to 8.7 percent and the other variables remain constant, what will be the value of the stock? E $ d. If the risk-free return rises to 4 percent and the return on the market rises to 9.6 percent, what will be the value of the stock? m4: $ . L e. If the beta coefcient falls to 1.5 and the other variables remain constant, what will be the value of the stock? if f. Explain why the stacks value changes in cthraugh e. The increase in the return an the market eSeIectr v the required return and *Select v the value of the stack. lI The increase in the risk-free rate and the simultaneous increase in the return on the market cause the value ofthe stock to -select- v . The decrease in the beta coefcient causes the rm tn become 'Seledr v risky as measured by beta, which *Selecb v the value of the stack. 0 Type here to search