Question
Shares in Brothers Grimm, Inc., manufacturers of gingerbread houses, are expected to pay a dividend of $8.50 in one year and to sell for $93
Shares in Brothers Grimm, Inc., manufacturers of gingerbread houses, are expected to pay a dividend of $8.50 in one year and to sell for $93 per share at that time. How much should you be willing to pay today per share of Grimm under the following circumstances?
a. Consider a safe rate of interest of 5.7 percent and assume that investing in Grimm carries no risk. Grimm's share value would be $_____
b. Consider a safe rate of interest of 10.7 percent and assume that investing in Grimm carries no risk. Grimm's share value would be $_____
c. Consider a safe rate of interest of 5.7 percent, but your risk premium is 3 percent. The share value today would be $
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