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

question 84

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 market 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

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Definitions:

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