Comptron currently trades for price based upon

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Comptron currently trades for a price based upon its last dividend paid of $4, its beta of 1.1 and expected growth of 2%. The risk free and risk premium are 2.5% and 6%, respectively. The new CEO wants to launch new initiatives for growth. In discussing the plans with the CFO, the new initiatives boil down to an increased growth rate to 5%, but at the cost of increasing beta to 1.4 should the initiatives be undertaken?

a. Yes--new stock price should move to $67.49, an increase over its current price.

b. Yes--new stock price should move to $71.19, an increase over its current price of $58.29.

c. No--new stock price should move to $67.49, a decrease from its current price.

d. No--new stock price should move to $71.19, a decrease from its current price.

Reference no: EM13881244

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