Should micromatic undertake the planned expansion.

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Micromatic is considering expanding into a new product area. Micromatic's current beta is 1.2 and its beta is expected to increase to 1.45 after the expansion. The long-term growth rate of the firm's earnings is expected to increase from 6.5 percent to 10 percent. Micromatic's current dividend is $1.70 per share, the current risk-free rate is 9.1 percent, and the expected market return is 12.9 percent. Should Micromatic undertake the planned expansion?

A) Yes, stock price increases $0.45

B) No, stock price decreases $15.27

C) Yes, stock price increases $15.27

D) No, stock price decreases $10.15

Reference no: EM131063896

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