Reference no: EM132234761

Betty Clinics, an investor-owned chain of ambulatory care clinics, just paid a dividend of $2 per share. The firm's dividend is expected to grow at a constant rate of 5 percent per year, andinvestors require a 15 percent rate of return on the stock.

a. I need the stock's value. Please show work.

b. Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13 percent. Under these conditions, I need the stock's value. Please show work.

c. Return to the original 15 percent required rate of return. Assume that the dividend growth rate estimate is increased to a constant 7 percent per year. I need the stock's value. Please show work.

d. Six years ago, Amy Community Hospital issued 20-year municipal bonds with a 7 percentannual coupon rate. The bonds were called today for a $70 call premium--that is, bondholdersreceived $1,070 for each bond. I need the realized rate of return for those investors who bought the bonds for $1,000 when they were issued. Please show work.

e. I need an example of the use of simple linear regression in estimating assets requirements. I need the strengths and limitations of this tool.