Question
The following information is given about stock F and the market: Risk free rate is 3% Expected rate of return on an average stock is
The following information is given about stock F and the market: Risk free rate is 3% Expected rate of return on an average stock is 8% Beta coefficient for stock F is 0.8 Current Price of stock F is $38.85 Growth rate is 2% Next expected dividend is $1.75
a) Is the stock price in equilibrium? Explain. (Show all calculations to support your answer).
b) Considering your answer to part a), What will investors do? What will occur in the market?
Please dont use excel for answer
Show proper work
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
15th edition
978-1118159644, 9781118562185, 1118159640, 1118147294, 978-1118147290
