Question
Asset Alpacas Co. is currently trading at $50 per share, and analysts are utilizing a one-stage dividend discount model to determine the stock's fair value.
Asset Alpacas Co. is currently trading at $50 per share, and analysts are utilizing a one-stage dividend discount model to determine the stock's fair value. They project the upcoming dividend is expected to be $3.00, and it will grow at a constant rate forever. Three groups of analysts have projected that the constant growth rate will be 8%, 10%, and 12%, with an equal probability of accuracy. The discount rate of the stock is 16%. Assume that the stock price will immediately change to its fair value after you purchase the stock at $50, the expected return on this investment is _____ %
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