Question
Antigone Inc. paid out a dividend of $1.75, and analysts expect it to grow at 6% for the foreseeable future. The market rate is 17%,
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Antigone Inc. paid out a dividend of $1.75, and analysts expect it to grow at 6% for the foreseeable future. The market rate is 17%, the T-Bill rate is quoted at 4%, and Antigone stock is selling at $15.50 (beta 1.2). Answer the following questions:
a) What is the expected return on Antigone stock?
b) Are Antigone shares overpriced, underpriced, or correctly priced?
c) Is Antigone stock above, below, or on the SML?
d) What is the equilibrium price of Antigone stock?
Step by Step Solution
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Step: 1
To answer the questions we need to calculate the expected return on Antigone stock compare it to the market rate determine if the shares are overprice...
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Contemporary Engineering Economics
Authors: Chan S. Park
5th edition
136118488, 978-8120342095, 8120342097, 978-0136118480
