Question
Target Inc stock is expected to pay a dividend of $3 per share at the end of this year (D1 = $3); its beta is
Target Inc stock is expected to pay a dividend of $3 per share at the end of this year (D1 = $3); its beta is 0.9. The risk-free rate is 1.5% and the market risk premium is 6%. The dividend is expected to grow at an annual rate of 1% forever.
Part a) Calculate the fair market value per share based on the present value of dividends (DDM).
Part b) What should be the growth rate to justify a fair market value per share of $50?
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Entrepreneurial Finance
Authors: J. Chris Leach, Ronald W. Melicher
7th Edition
0357442040, 978-0357442043
