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Assume MRK just finished paying an annual dividend of $1.80. You look up their beta and it equals 0.39, implying it's much less risky than
Assume MRK just finished paying an annual dividend of $1.80. You look up their beta and it equals 0.39, implying it's much less risky than the market portfolio. The current risk free rate equals 2.35 %. Assume a market risk premium of 5 %. Merck's current stock price is $58.81. Assuming investors expect Merck to grow at a constant rate in perpetuity, what is that growth rate expectation? (hint: it's the one that causes the PV of expected future cash flows to equal $58.81)
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