What is the value of a stock

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What is the value of a stock that just paid $2 dividend and expected to increase dividends by 3% per year since next year? The required return is 15%.

Assume the company's 15% required return resulted from a risk-free rate of 9%, a market return of 13%, and a beta of 1.50. Now imagine that the financial manager makes a decision that, without changing expected dividends, causes the firm's beta to increase to 1.75. Assume the risk free rate and market return remain the same. Based on CAPM model, how would the change in beta affect the stock value? By how much?

Reference no: EM132200038

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