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Melissa is trying to value the stock of Generic Utility Inc., which is clearly not growing at all. Generic declared and paid a $5 dividend
Melissa is trying to value the stock of Generic Utility Inc., which is clearly not growing at all. Generic declared and paid a $5 dividend last year. The required return for utility stocks is 11%, but Melissa is unsure about the financial reporting integrity of Generic's finance team. She decides to add an extra 1% "credibility" risk premium to the required return as part of her valua-tion analysis.
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