BUP Ltd is expected to pay dividends of $1.00 next year and these dividends are expected to
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Question:
BUP Ltd is expected to pay dividends of $1.00 next year and these dividends are expected to grow at an annual rate of 10% forever. The companys beta has been estimated as 1.2. The market risk premium is expected to be 10% and the riskfree rate is 5%. Based on the CAPM, estimate the companys share price today. Show all calculations. If the market price of these shares today was $15.50 what, if anything, can you say about the relative under- or over-pricing of these shares and why?
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