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ABC company's ordinary shares are expected to pay $ 3 per share in dividends in 4 years and after which the dividends are expected to
ABC company's ordinary shares are expected to pay $ 3 per share in dividends in 4 years and after which the dividends are expected to grow at 2% annually forever. Company ABC's shares have a beta of 1.75. The long-term return of ASX200 is 9% and the return of T-bonds is 4%.
(a) What is the expected return of ABC's shares according to the CAPM?
(b) What is the implied price per share?
(c) If the shares are selling for $25/share, should you make the investment?
(a) What is the expected return of ABC's shares according to the CAPM?
(b) What is the implied price per share?
(c) If the shares are selling for $25/share, should you make the investment?
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Financial Management Theory and Practice
Authors: Eugene F. Brigham, Michael C. Ehrhardt
15th edition
130563229X, 978-1305632301, 1305632303, 978-0357685877, 978-1305886902, 1305886909, 978-1305632295
