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05.11.2019 •
Business
Assume that the risk-free rate is 8 percent, the expected return on the market is 13 percent, and that a share of stock in your company has a beta of 1.4. if the current dividend just paid (d0) was $2.25 and is expected to grow at a long-run growth rate of 10 percent per year, then how much should investors be willing to pay for this stock? group of answer choices
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Ответ:
The investors should be willing to pay $49.50 for this stock
Explanation:
Hi, first, we need to find out what the cost of equity is in order to find the price of the stock. that is:
Where:
rf= Risk free rate
rm=return on the market
r(e)=cost of equity
After finding r(e), we would need to find the price using the following equation.
Where:
Do= last dividend
g= growth rate
r(e)= cost of equity.
ok, so, let´s find out what the cost of equity is.
So, the r(e)=15%, now let´s find the price of this stock
Therefore, the price of this stock is $49.50
Best of luck.
Ответ:
znzmsnsmsndnd end
Explanation:
not not having free time to read this much long answer