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At t-0, the market price of a firm's stock is $50 per share. An analyst estimates that the stock will have a price of $57
At t-0, the market price of a firm's stock is $50 per share. An analyst estimates that the stock will have a price of $57 per share and pay a dividend of $3 per share at t-1 The stock has a beta of 1.2. The risk-free rate between t-0 and t-1 is 5%. The expected rate of return on the market portfolio between t-0 and t-1 is 15%. Answer questions (a) through (d) accordingly (a) What will be the analyst's estimated return on this stock from t 0 to t1 (b) According to CAPM, what is the required rate of return on the stock from t-0 to t-1? (c) According to CAPM, what is the stock's intrinsic value per share at t-0? (d) The analyst will conclude that the stock is worth buying or not? Explain
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