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Problem:

Assume the beta coefficient for a company's stock is ? = 0.2, the risk-free rate of return, rRF, is 8% and the required rate of return on the market, rM, is 14%. Assume the dividend expected during the coming year is D1 = $2.50 and the growth rate is a constant 7%. Complete parts (a) through (c) below.

Required:

Question 1: Compute the price at which the company's stock should sell.

Question 2: Find the new price of the stock assuming the risk-free rate of return is 5% and the required rate of return on the market is 11%.

Question 3: What would be needed for a stock to be in equilibrium?

Note: Please show guided help with steps and answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91168855

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