Micromatic Is Considering Expanding into a New Product Area

Multiple Choice

Micromatic is considering expanding into a new product area.Micromatic's current beta is 1.2 and its beta is expected to increase to 1.45 after the expansion.The long-term growth rate of the firm's earnings is expected to increase from 6.5 percent to 10 percent.Micromatic's current dividend is $1.70 per share, the current risk-free rate is 9.1 percent, and the expected market return is 12.9 percent.Should Micromatic undertake the planned expansion?

A) No, stock price decreases $10.15
B) Yes, stock price increases $15.27
C) Yes, stock price increases $0.45
D) No, stock price decreases $15.27