Question 17

Placidia Ine. just paid a dividend of $3.20 per share. Analysts forecast that the corporation's Use the following information for Problems 1517. dividends will grow by 25% over the first year, 18% over the second year, and 12% over the third year. After the third year, analysts believe that the corporation's dividends will grow at a constant rute of 4% for the foreseeable future. The corporation's beta is 2.1 . The current risk-free rate of return is 3.7% and the return on the market is 12.5%. 15. Based on the CAPM, what is the required rate of return on the corporation's common stock? a.b.c.d.29.95%22.18%16.77%12.50% 16. What is the stock's expected price per share at the end of year 3 (i.e. the horizon value of dividends at the end of year 3 )? a. $40.58 c. $36.71 d. $29.64 17. Based on the dividend valuation model, what should the intrinsic value of the stock be today? a. $31.90 b. $29.84 c. $26.32 d. $25.73