What will be the change in price per share

Assignment Help Financial Management

Reference no: EM131063613

You are given the following data:

(1) The risk-free rate is 5 percent.

(2) The required return on the market is 8 percent.

(3) The expected growth rate for the firm is 4 percent.

(4) The last dividend paid was $0.80 per share.

(5) Beta is 1.3.

Now assume the following changes occur:

(1) The inflation premium drops by 1 percentage point.

(2) An increased degree of risk aversion causes the required return on the market to go to 10 percent after adjusting for the changed inflation premium.

(3) The expected growth rate increases to 6 percent.

(4) Beta rises to 1.5.

What will be the change in price per share, assuming the stock was in equilibrium before the changes?

Reference no: EM131063613

Questions Cloud

When preparing a statement of cash flows : When preparing a statement of cash flows on the indirect method, each of the following should be classified as an operating activity cash flow except : Answer Question 20 answers An increase in accounts receivable.

Differently to effect a more financially sound future : Provide an example scenario with rationale of an area in your personal life in which you would like to apply, or have already applied, time value of money concepts. What might you do differently to effect a more financially sound future

Economic roles of the government : Some economists argue that the government intervention makes the economic outcome even worse. Some argue that there are important economic roles of the government. What is your opinion? Does the government do good or bad? Briefly discuss.

Is there any legal or moral objection to such programs : Consider the following questions: Do you think it is feasible or reasonable to expect privatization of government activities to maintain the democratic ideals we expect? Do you think we should exchange some of our democratic expectations for possi..

What will be the change in price per share : What will be the change in price per share, assuming the stock was in equilibrium before the changes?

Despite an abundance of these resources : 1.Topic: When you travel to South America, you encounter countries that have a vast amount of natural resources, and very large labor forces. However, despite an abundance of these resources, you also see a lot of poverty. Can you provide an econo..

Estimates the present value of the cash flows : A financial manager estimates the Present Value of the cash flows produced by a machine to be $55,000. Which of the following is the most accurate statement that could be inferred from this estimate?

Decrease in consumer spending on output : Use a correctly labeled AD/AS graph to illustrate the short-run effect of the decrease in consumer spending on output and price level. Explain the impact on employment.

Chief advantage of factoring of receivables : Which of the following is a chief advantage of factoring of receivables? Factoring is a cheap way to finance Factoring transfers the risk of default to the factor Factoring lengthens the Operating Cycle Factoring is easily obtainable during economic ..

User Account

All Pages