Assume the risk-free rate is 6 percent and the market risk premium is 6 percent. The stock of… 1 answer below »

Assume the risk-free rate is 6 percent and the market risk premium is 6 percent. The stock of Physicians Care Network (PCN) has a beta of 1.5. The last dividend paid by PCN (D0) was $2 per share.

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a. What would PCN’s stock value be if the dividend was expected to grow at a constant:

• –5 percent?

• 0 percent?

• 5 percent?

• 10 percent?

b. What would be the stock value if the growth rate is 10 percent, but

PCN’s beta falls to:

• 1.0?

• 0.5?