A common stock currently has a beta of 1.3, the risk-free rate is an annual rate of 6 percent, and the market return is an annual rate of 12 percent
The stock is expected to generate per-share benefits of $5.20 during the coming period. A toxic spill results in a lawsuit and potential fines, and the beta of the stock jumps to 1.6. Assuming zero growth the new equilibrium, price of the stock ________.
A) will be $37.68
B) will be $43.33
C) will be $33.33
D) cannot be determined from the information given
C
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What will be an ideal response?
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