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I continue to get this answer incorrect. You have to use Excel to find the answer, but I still cannot figure it out. Let's assume
I continue to get this answer incorrect. You have to use Excel to find the answer, but I still cannot figure it out.
Let's assume that you're thinking about buying stock in West Coast Electronics. So far in your analysis, you've uncovered the following information: The stock pays annual dividends of $5.03 a share indefinitely. It trades at a P/E of 10.1 times earnings and has a beta of 1.19. In addition, you plan on using a risk-free rate of 4.00% in the CAPM, along with a market return of 9%. You would like to hold the stock for 3 years, at the end of which time you think EPS will be $7.03 a share. Given that the stock currently trades at $60.42, use the IRR approach to find this security's expected return. Now use the dividend valuation model (with constant dividends) to put a price on this stock. Does this look like a good investment to you? Explain. This security's expected return (IRR) is 17.11 %. (Round to two decimal places.) The value of the stock is $ 60.21. (Round to the nearest cent.) Using the dividend valuation model (with constant dividends), the value of the stock is $ 51.67. (Round to the nearest cent.)Step by Step Solution
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