Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Netflix IPOd in March 2020 with a first-day-of-trading closing price of $26.54 and it is currently trading at $112.46. Using our DDM model, we value

Netflix IPOd in March 2020 with a first-day-of-trading closing price of $26.54 and it is currently trading at $112.46. Using our DDM model, we value Netflix at $21.54 per share, its beta is 2.13, the equity premium is 5% and the risk-free rate is 0.66%. If you expect Netflix's stock price to converge to the firms expected value in one year, what is the 1-year expected return (annualized, rounded to the nearest 0.01%)?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Municipal Finances A Handbook For Local Governments

Authors: Catherine D. Farvacque-Vitkovic, Mihaly Kopanyi

1st Edition

082139830X, 978-0821398302

More Books

Students also viewed these Finance questions

Question

For problem 1, determine the p-value.

Answered: 1 week ago