Question

1- Stock A has a current price of $25.00, a beta of 1.25, and a dividend yield of 6%. If the Treasury bill yield is 5% and the market portfolio is expected to return 16%, what should Stock A sell for at the end of an investor’s two year investment horizon? (Hint: Solve for the growth rate using the Gordon Growth Model).

Question options:

	$31.00
	$31.78
	$32.15 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 2-HMTV has planned on diversifying into the dual-PVR field. As a result, HMTV’s beta would rise to 1.6 from 1.2 and the expected future long-term growth rate in the firm’s earnings would increase from 12% to 16%. The expected market return is 14%; the risk-free rate is 7%, and the current dividend is $0.50. Should HMTV undertake the expansion? Question options: Yes, the stock price is expected to increase $9.89 No, the stock price is expected to decrease $3.38 No, the stock price is expected to decrease $8.28

Answer 1

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