Nagel Equipment has a beta of 0.88 and an expected dividend growth rate of 4.00% per year.

Question:

Nagel Equipment has a beta of 0.88 and an expected growth rate of 4.00% per year. The T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 15.00%. Using the SML, what is the firm's required rate of return? If the of the stock of Nagel Equipment is 16%, how will you take advantage of the expected future path of the stock? Illustrate graphically and explain clearly your decision.
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...