Cartwright Brothers' Stock Is Currently Selling for $40 a Share

Multiple Choice

Cartwright Brothers' stock is currently selling for $40 a share. The stock is expected to pay a $2 dividend at the end of the year. The stock's dividend is expected to grow at a constant rate of 7 percent a year forever. The risk-free rate (rRF) is 6 percent and the market risk premium (rM - rRF) is also 6 percent. What is the stock's beta?

A) 1.06
B) 1.00
C) 2.00
D) 0.83
E) 1.08