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Really struggling with these two questions. Can anyone help? You are considering purchasing a stock. Using the DDM and CAPM, you calculate the stock's expected
Really struggling with these two questions. Can anyone help?
You are considering purchasing a stock. Using the DDM and CAPM, you calculate the stock's expected return at 15\%. The CAPM gives a required return of 12%. What should you do and why should you do it? LO5 Buy the stock because it offers a high enough return to justify its risk. Do not buy the stock until the expected return meets the required refurn. Buy the stock because the intrihsic value is lower than the current market price. Do not buy the stock because it olfers too low a return to justify its risk. Suppose you are considering buying a stock. You expect the stock to pay a dividend of $4 one year from today, $4.10 two years from today, and then dividend will grow 1.5% each year after that. Using the CAPM, you estimate. your required return at 9% to compensate you for the risk of this stock's cash flows. What is the maximum price you are willing to pay for a share of the stock? LO3 $53.82$41.19$52.67$45.13 Step by Step Solution
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