Determine stock selling price

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Reference no: EM1359217

The risk free rate of return, r RF, is 6 percent; the required rate of return on the market, rM is 10 percent; and Upton Company's stock has a beta coefficient of 1.5.

A. If the dividend expected during the coming year, D1, is $2.25 and if g= a constant 5 percent at what price should Upton's stock sell?

B. Now suppose the Federal Reserve Board increases the money supply, causing the risk-free rate to drop to 5% and rM to fall to 9 percent. What would happen to Upton's price?

Reference no: EM1359217

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