Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose the risk - free rate is 1 . 4 0 % and an analyst assumes a market risk premium of 7 . 0 9

Suppose the risk-free rate is 1.40% and an analyst assumes a market risk premium of 7.09%. Firm A just paid a dividend of $1.01 per share. The analyst estimates the \beta of Firm A to be 1.35 and estimates the dividend growth rate to be 4.92% forever. Firm A has 295.00 million shares outstanding. Firm B just paid a dividend of $1.54 per share. The analyst estimates the \beta of Firm B to be 0.76 and believes that dividends will grow at 2.58% forever. Firm B has 188.00 million shares outstanding. What is the value of Firm A?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Investing

Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk

12th edition

978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359

Students also viewed these Finance questions