Multiple Choice
AKA's stock is currently selling for $11.44. This year the firm had earnings per share of $2.80, and the current dividend is $0.68. Earnings are expected to grow 7% a year in the foreseeable future. The risk-free rate is 10%, and the expected market return is 14.2%. What will be the effect on the price of AKA's stock if systematic risk increases by 40%, all other factors remaining constant?
A) an increase of $1.14
B) a decrease of $0.40
C) a decrease of $1.99
D) Cannot determine from the given data
Correct Answer:
Verified
Correct Answer:
Verified
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