What is the stock value

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Question - Thompson & Anders, Inc. wish to enhance the stock portfolio of the Radiology Department. After an extensive analysis of the healthcare financial performance, the following cost structure was determined. Please assist them with their quest for equity return and profit with the information that follows: of major importance to the firm is that they are an investor-owned ambulatory hospital and they just paid a $2.00 dividend per share. The firm's dividend is expected to grow at a constant rate of 5 percent per year, and investors require a 15 percent rate of return on the stock:

a. What is the stock's value?

b. Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13 percent, under these conditions, what is the stock's value?

c. Return to the original 15 percent required rate of return. Assume that the dividend growth rate estimate is increased to a constant 7 percent per year. What is the stock's value?

Reference no: EM132118124

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