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Please answer the entire question. I have to repost this question becasue the entire question was not answered completely in my previous posts. The question
Please answer the entire question. I have to repost this question becasue the entire question was not answered completely in my previous posts. The question has 6 parts to it. The subsquent questions depends of the preceeding answers. Thanks
6. (34 points) The risk-free rate of return is 8 percent, the expected rate of return on the market portfolio is 16 percent, and the stock of Analog Corporation has a beta coefficient of 1.5 pays out 40 percent of its earnings in dividends, and the earnings per share in the coming year are expected to be $2. Dividends were just paid and expected will earn an E of 20 percent to be paid annually. Analog growth model.] per year on all reinvested earnings [Hint: Use the constant 1) (5 points) Estimate the firm's expected dividend growth. 2) (5 points) Calculate the equilibrium required rate of return according to the CAPM. 3) (5 points) Estimate the fair value of the stock. ut 20 cted return? Is the market in equilibrium? [hint above/on/below the SML?] If not, how would equilibrium be achieved? 5 (5 points) Calculate the present value of growth opportunity. Explain your answer. 6) points) If Analog cut its dividend payout ratio to 25 percent, what would happen to were to its stock price (calculate the new price? WhyStep by Step Solution
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