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Question
Hard Hat Construction's stock is currently selling at an equilibrium price of $30 per share. The firm has been experiencing a 6 percent annual growth rate. Last year's earnings per share, E0, were $4.00, and the dividend payout ratio is 40 percent. The risk-free rate is 8 percent, and the market risk premium is 5 percent. If systematic risk (beta) increases by 50 percent, and all other factors remain constant, by how much will the stock price change? (Hint: Use four decimal places in your calculations.)
a. u2212$7.33
b. +$7.14
c. u2212$15.00
d. u2212$15.22
e. +$22.63
Answer
This answer is hidden. It contains 330 characters.
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