Question
Let's assume thatyou're thinking about buying stock in West Coast Electronics. So far in youranalysis, you've uncovered the followinginformation: The stock pays annual dividends of
Let's assume thatyou're thinking about buying stock in West Coast Electronics. So far in youranalysis, you've uncovered the followinginformation: The stock pays annual dividends of $4.76a share indefinitely. It trades at aP/E of 9.4times earnings and has a beta of 1.16.Inaddition, you plan on using arisk-free rate of 3.00%in theCAPM,along with a market return of 11%.You would like to hold the stock for 3years, at the end of which time you think EPS will be $9.75a share. Given that the stock currently trades at $58.95.
A)Thissecurity's expected return(IRR) is___________
B)The value of the stock is $__________
C)Using the dividend valuation model(with constantdividends), the value of the stock is $__________
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