Problem:
Assume the beta coefficient for a company's stock is ? = 0.2, the risk-free rate of return, rRF, is 8% and the required rate of return on the market, rM, 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.
Required:
Question 1: Compute the price at which the company's stock should sell.
Question 2: 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%.
Question 3: What would be needed for a stock to be in equilibrium?
Note: Please show guided help with steps and answer.