Question
RIO's companys ordinary shares are expected to pay $2 per share in dividends for 6 years and after which the dividends are expected to grow
RIO's companys ordinary shares are expected to pay $2 per share in dividends for 6 years and after which the dividends are expected to grow at 2.2% annually forever. Company ABC's shares have a beta of 1.7. The long-term return of ASX200 is 9.5% and the market risk premium is 5%.
a.What is the expected return of RIOs shares according to the CAPM?
b.What is the implied price per share?
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Intermediate Financial Management
Authors: Eugene F. Brigham, Phillip R. Daves
13th Edition
1337395080, 9781337395083
