Question
Q1: Assuming Stock (A) is selling for $8, just paid dividend of $1.5 and the dividend growth rate is 3%. Using DDM calculate the expected
Q1: Assuming Stock (A) is selling for $8, just paid dividend of $1.5 and the dividend growth rate is 3%. Using DDM calculate the expected rate of return.
Q2: Is Stock (A) overpriced, underpriced of fairly priced? If it has a beta of 2, market return is 15% and risk free rate is 3%. Where does it lie in relation to the SML? Using DDM what is the equilibrium price?
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Investment Science
Authors: David G. Luenberger
2nd Edition
0199740089, 978-0199740086
