A Common Stock Currently Has a Beta of 1

Multiple Choice

A common stock currently has a beta of 1.3, the risk-free rate is an annual rate of 6 percent, and the market return is an annual rate of 12 percent. The stock is expected to generate per-share benefitsof $5.20 during the coming period. A toxic spill results in a lawsuit and potential fines, and the beta of the stock jumps to 1.6. The new equilibrium price of the stock_________ .

A) will be $33.33
B) will be $37.68
C) will be $43.33
D) cannot be determined from the information given