Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Roku IPOd in September 2017 with a first-day-of-trading closing price of $26.54 and it is currently trading at $112.46. Using our DDM model, we value
Roku IPOd in September 2017 with a first-day-of-trading closing price of $26.54 and it is currently trading at $112.46. Using our DDM model, we value Roku at $21.54 per share, its beta is 2.13, the equity premium is 5% and the risk-free rate is 0.66%. If you expect Rokus stock price to converge to the firms expected value in one year, what is the 1-year expected return (annualized, rounded to the nearest 0.01%)
a. -66.17% b. -73.73% c. -78.68% d. 469.05% e. None of the above
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started