what would be the stock value if the growth rate is 10 percent, but PCN's beta falls to:
1-0?
0-5?
To determine the stock value based on different growth rates and beta values, you can use the formula for the Capital Asset Pricing Model (CAPM):
Stock Value = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)
Let's assume the risk-free rate is 3% and the market return is 8%.
1. When the beta falls to 1-0:
Stock Value = 3% + (1-0) * (8% - 3%)
= 3% + 1 * 5%
= 3% + 5%
= 8%
Therefore, for a beta of 1-0, the stock value would be 8%.
2. When the beta falls to 0-5:
Stock Value = 3% + (0-5) * (8% - 3%)
= 3% + (-0.5) * 5%
= 3% + (-0.5) * 0.25
= 3% + (-0.125)
= 2.875%
Therefore, for a beta of 0-5, the stock value would be 2.875%.
Please note that the CAPM is a simplified model used to estimate the expected return of an investment and comes with its limitations. The actual stock value can be influenced by various factors beyond just growth rate and beta.