Question
Suppose LlanoRiverFloaters Corporation stock just paid a one-time special dividend of $20 to distribute some excess cashFuture dividends are expected to be back to normal,
Suppose LlanoRiverFloaters Corporation stock just paid a one-time special dividend of $20 to distribute some excess cashFuture dividends are expected to be back to normal, with dividends paid once- annually, with an expected dividend of $3.35 next year and every year thereafter (no growth). What is the price of the stock today if the company's asset beta is 1.2, the company is half-equity and half-debt and there are no taxes? Assume the expected market return is 11% and treasury bonds have yields of 3%. a. Ummmwut? b. Stock price is negative c. Price is between $0 and $5 d. Price is between $5 and $10 e. Price is between $10 and $15 f. Price is between $15 and $20 g. Price is more than $20
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