Price: Consider the following information: Price: Rullo Inc. Year 1 Year 2 Year 3 Year 4 Beta Current Price 1412b) What is the value of Papik Inc.? $22.41 -5 Circle One: Dividend 1.65 1.75 0 2.00 2 88.24 40.69 12) The dividend for both of these companies will increase at a constant rate of 5% forever starting in year 5. The expected market return is 4.7%, and the risk-free rate is 2.5%. 12a) What is the value of Rullo Inc.? $94.88 -5 E(re) = .025 +21.047-.025) =0.064 = 6.9% P = = Rullo Ind Papik Inc. Year 1 Year 2 Year 3 Year 4 Is 3 Beta Current Price 15.25 P = 1.65 +1.75 +0+2+ (1+. 047) (1.047) (20171 (1.0471* P = 05 = (P9) = (2x1.05) (R-g) (.047-5)==003 =-700 2.1 D5 (265)*(1.047)* 1.58 1.60 P = 1.584 +1.500 + 0 + 1.66+ 1.75 = 6.59 +88.24-9483 Dividend 1.00 1.00 2.00 1.50 6 1 2 1.5 + (1.047) 1.047)2 + (1.047) + (2.0+7) (1.0+7)+ P = 4.85 + 16.56 = 21.41 -4 "Pays Dotter dividends with Ly Both stocks also PV of P (320.-230.) 27.5+24) 12c) Based on the above information from 12a and 12b, which stock would you buy and why? t + + P = Papik Inc. are P4= D (1.077)+ =1.75 a lower bota. (1.5*1.05) 1.575. 132+15.25 --1.31 undervalued is our calculates valu are corre

Consider the following information: 12) The dividend for both of these companies will increase at a constant rate of 5% forever starting in year 5 . The expected market return is 4.7%, and the risk-free rate is 2.5%. P4=(R03)D5=(D4g)=(21)05)=0.03) 12a) What is the value of Rullo inc.? Price: $94.185 P0=1.591+1.606+0+1.66+1.75=6.59+88.2+=948 =.025+2(.047.025)=0.069=6.9% 14. 12 b) What is the value of Papik inc.? P0=4.85+16.56=21.11131+15.25 12c) Based on the above information from 12a and 12b, which stock would you buy and why? Circle One: Papik Inc. 4 B. Dether diviews bith a lomer befa. Both stocks ats ane underviub is our calculeks 6 art