Question
Alpha&Beta board estimates that the company will grow at a 15% annual rate and is expected to continue to do so for 3 more years.
Alpha&Beta board estimates that the company will grow at a 15% annual rate and is expected to continue to do so for 3 more years. Following this explosive growth it will grow at a 4% rate. Alpha&Beta has a constant 30 percent payout ratio, and this year's earnings where $2 million. Alpha&Beta beta is 1.25, the risk-free rate is 8 percent, and the market risk premium is 4 percent. If the market is in equilibrium, what is the market value of the firm's common equity if the firm has 1 million shares outstanding?
| a. | $9.18 million | |
| b. | $7.32 million | |
| c. | $10.56 million | |
| d. | $6.41 million | |
| e. | $12.96 million |
| a. | $9.18 million | |
| b. | $7.32 million | |
| c. | $10.56 million | |
| d. | $6.41 million | |
| e. | $12.96 million |
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Financial Innovation Regulation And Crises In History
Authors: Harold James
1st Edition
0367669528, 978-0367669522
