Question:
Barramundi Inc. stock is currently selling at $40 per share (its equilibrium price) given that the risk free interest rate is 8% and the equilibrium risk premium on the market portfolio is 6%. The firm's long run growth is expected to remain 7% per year forever. Last year's EPS were $4, and the dividend payout ratio is 50%. If beta increases by 50%, by how much will the stock price change? Assume all other factors remain constant.