Question
Bakers Inn is a mature company that has experienced modest success over that last few years. Over the last few years, the company's earnings have
Bakers Inn is a mature company that has experienced modest success over that last few years. Over the last few years, the company's earnings have grown at a modest rate of 3.5%. It is expected that the company will be able to sustain this growth rate into the future. The company expects to pay a dividend of $3.68 this year. If investors in the past have required a 11.5 percent rate of return on the company's stock,
a)Calculate the expected value of the share in the market today?
b)You observe that the current market price for the company shares is $43.35. Calculate the expected return that investors are expecting based on this price.
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