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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.)
Natural Monopoly
A market condition in which a single firm can supply a product or service to an entire market at a lower cost than what would be possible if there were multiple firms.
Economies Of Scale
The cost advantage that arises with increased output of a product, as fixed costs are spread out over more units of production.
Total Demand
The entire quantity of a product or service that consumers in a market are willing and able to purchase at various prices.
Marginal Revenue
The additional revenue that a firm receives from selling one extra unit of a product or service.
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