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

question 85

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

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Definitions:

Retroactive Interference

A phenomenon in psychology where newly acquired information interferes with the recall of previously learned information.

Repression

A psychological defense mechanism where distressing thoughts, memories, or impulses are unconsciously pushed out of conscious awareness.

Semantic Memory

A type of long-term memory involving the storage of general knowledge, facts, concepts, and meanings not tied to specific experiences.

Concepts

Mental representations or understandings of categories or classifications of objects, events, or people, based on shared properties or characteristics.