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Lee's Food Fair's stock has a beta value of 1.5. Last year, the company paid a dividend of $2.30, and it expects a constant growth
Lee's Food Fair's stock has a beta value of 1.5. Last year, the company paid a dividend of $2.30, and it expects a constant growth rate of 5% in dividends per share, earnings and stock price. Assume that the current risk-free rate is 7% and the market risk premium is 6%. Required: i) Calculate the required rate of return for the stock. ii) What is the equilibrium price of the stock? (5 marks) (5 marks) A telecommunications company is expected to enjoy dividend growth of 22% for the next two (2) years, after which the dividend growth is expected to follow a constant rate of 8%. The company's last dividend was $1.75 and the stockholders' required rate of return is 15%. Required: Calculate the intrinsic value of the stock today (Po). (15 marks)
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