HDTV Has Planned on Diversifying into the Dual-VCR Field

question 39

Multiple Choice

HDTV has planned on diversifying into the dual-VCR field.As a result, HDTV'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, km, is 14%;the risk free rate, rf, is 7%;and the current dividend, Do, is $0.50.Should HDTV go into the dual-VCR field?

• A)No-stock price decrease $7.82
• B)Yes-stock price increase $9.89
• C)Yes-stock price increase $3.81
• D)No-stock price decrease $3.78

---

Definitions:

Spanish Exploration

The period where Spain explored the Americas and other parts of the globe, beginning in the late 15th century, ushering in the era of European colonization.

European Diseases

Infectious diseases brought to the Americas by European explorers and colonizers that had devastating effects on the indigenous populations, who had no immunity to these diseases, including smallpox, influenza, and measles.

Quebec

A province in eastern Canada, known for its French-speaking population and distinctive French-Canadian culture.

Samuel de Champlain

A French navigator, cartographer, and explorer credited with founding New France and Quebec City in the early 17th century.