Ceejay Corporation's Stock Is Currently Selling at an Equilibrium Price

Multiple Choice

Ceejay Corporation'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, what will be the new stock price? (Use 4 decimal places in your calculations.)

A) $16.59
B) $18.25
C) $21.39
D) $22.69
E) $53.48