Question
Assume that the risk-free rate of interest is 4% and the expected rate of return on the market is 16%. A share of stock sells
Assume that the risk-free rate of interest is 4% and the expected rate of return on the market is 16%. A share of stock sells for $63 today. It will pay a dividend of $3 per share at the end of the year. Its beta is 1.1. What do investors expect the stock to sell for at the end of the year?
Expected Stock Price:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To find the expected stock price at the end of the year we can use the dividend discount model DDM c...
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Step: 2
Step: 3
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Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective
Authors: James M Wahlen, Stephen P Baginskl, Mark T Bradshaw
7th Edition
9780324789423, 324789416, 978-0324789416
