Compute the price at which the companys stock

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Reference no: EM13196287

Assume the beta coefficient for a company's stock isß= 0.2, the risk-free rate of return, r_RF, is 8% and the required rate of return on the market, r_M, 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.

(a) Compute the price at which the company's stock should sell.

(b) 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%.

Reference no: EM13196287

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