Hard Hat Construction's Stock Is Currently Selling at an Equilibrium

question 17

Multiple Choice

Hard Hat Construction's stock is currently selling at an equilibrium price of $30 per share.The firm has been experiencing a 6 percent annual growth rate.Last year's earnings per share, E0, were $4.00, and the dividend payout ratio is 40 percent.The risk-free rate is 8 percent, and the market risk premium is 5 percent.If systematic risk (beta) increases by 50 percent, and all other factors remain constant, by how much will the stock price change? (Hint: Use four decimal places in your calculations.)

• A)−$7.33
• B)+$7.14
• C)−$15.00
• D)−$15.22
• E)+$22.63

---

Definitions:

Preconceptions

Pre-existing beliefs or opinions formed before having evidence or experience.

Assumptions

Beliefs or statements taken for granted without proof, often used as a basis for reasoning or argument.

Ethnocentrism

The belief in the inherent superiority of one's own ethnic group or culture, often resulting in prejudice against other cultures.

Cultural Pluralism

The coexistence of diverse cultures, where cultural differences are accepted and appreciated by the majority society.