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A firm is expected to pay a dividend of $3.36 in the upcoming year. Dividends are expected to grow at 9% per year. The risk-free
A firm is expected to pay a dividend of $3.36 in the upcoming year. Dividends are expected to grow at 9% per year. The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%. Investors use the CAPM to compute the market capitalization rate and use the constant-growth DDM to determine the value of the stock. The stock's current price is $84. Using the constant-growth DDM, the market capitalization rate is _________.
A. | 10% | |
B. | 17% | |
C. | 13% | |
D. | 12% |
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