Assume the risk-free rate is 6 percent and the market risk premium is 6 percent. The stock of PCN has a beta of 1.5. The last dividend paid by PCN was $2 per share.
a. What would PCN's stock value be if the dividend was expected to grow at a constant: * -5 percent? * 0 percent? * 5 percent?*10 percent?
b. What would be the stock value if the growth rate is 10 percent, but PCN's beta falls to * 1.0? * 0.5?