Question
The Emedical stock has a cash flow per share of $1, which is expected to grow at 3% forever. The rate of return for this
The Emedical stock has a cash flow per share of $1, which is expected to grow at 3% forever. The rate of return for this very risky company is 15%. Should you buy or sell the stock short given a current market price of $10? b) Another analyst thinks that the cash flow for Emedical is going to increase by 25% for one year and then at 3% for ever. Please re-calculate and say whether now you should buy or sell given a current market price of $10. c) Another analyst suggests that the rate of return is incorrect. He says that given that the of the company is 1.7, the expected return on the market is 10% and the risk free rate is 5%, we should consider a different rate of return. Is he right (show your calculation-just for the rate of return).
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