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Expected Return D 0 = $3.00 P 0 = $45 g = 2.0% Required Return r rf = 2% r m = 10% Note that
| Expected Return | ||||||
| D0 = | $3.00 | |||||
| P0 = | $45 | |||||
| g = | 2.0% | |||||
| Required Return | ||||||
| rrf = | 2% | |||||
| rm = | 10% | Note that this is the market return. | ||||
| b = | 0.9 | |||||
| With that background in mind, address the following questions. | ||||||
| a) Is this stock in equilibrium? Explain your reasoning. | ||||||
| b) If it is not in equilibrium, determine the equilibrium price. |
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
