Question
Assume a major investment service has just given Big Lake Realty its highest investment rating, along with a strong buy recommendation. As a result, you
Assume a major investment service has just given Big Lake Realty its highest investment rating, along with a strong buy recommendation. As a result, you decide to take a look for yourself and to place a value on the company's stock. Here's what you find: This year, Big Lake paid its stockholders an annual dividend of $3.68 a share, but because of its high rate of growth in earnings, its dividends are expected to grow at the rate of 9% a year for the next five years and then to level out at 6% a year. So far, you've learned that the stock has a beta of 1.23,the risk-free rate of return is 4.6%,and the expected return on the market is 10.7%. B) what is the value of the company's stock.
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