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A firm is currently priced per Gordons model. Beta is 1.25, expected rate of return on the market portfolio is 12%, and the risk-free rate
A firm is currently priced per Gordons model. Beta is 1.25, expected rate of return on the market portfolio is 12%, and the risk-free rate of return is 4%. ROE = 15%. Jensens alpha is zero. The firm has retention ratio of 60%. The next years dividend per share D1 is expected to be $1.50. Find the stock price per share.
| a. | 10 | |
| b. | 20 | |
| c. | 40 | |
| d. | 30 |
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