Question
Question # 6 (8 Marks) The following information is given about stock F and the market: Risk free rate is 3% Expected rate of return
Question # 6 (8 Marks)
The following information is given about stock F and the market:
Risk free rate is 3% Expected rate of return on an average stock is 8% Beta coefficient for stock F is 0.8 Current Price of stock F is $38.85 Growth rate is 2% Next expected dividend is $1.75
a) Is the stock price in equilibrium? Explain. (Show all calculations to support your answer).
b) Considering your answer to part a),
What will investors do?
What will occur in the market?
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Hospitality Management Accounting
Authors: Michael M. Coltman, Martin G. Jagels, Martin Jagels
7th Edition
0471348848, 978-0471348849
