HDTV Has Planned on Diversifying into the Dual-VCR Field

question 90

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, D_o, 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

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Definitions:

Cortex

The outer layer of various organs and systems in the body, such as the brain (cerebral cortex), responsible for higher order functions, including thought, memory, and sensory processing.

Endodermis

A layer of cells in the roots of land plants that acts as a selective barrier, regulating the passage of substances from the soil into the vascular system.

Xylem

The vascular tissue in plants responsible for transporting water and nutrients from the roots to the rest of the plant.

Root Epidermis

The outermost layer of cells in the root of a plant, which absorbs water and nutrients from the soil.