Question
The price the investors are willing to pay for a share of Bouchard Company's stock is $20. Investors expect its dividends to grow at a
The price the investors are willing to pay for a share of Bouchard Company's stock is $20. Investors expect its dividends to grow at a constant rate, 6%, forever. The stock's beta is 1.3, the market risk premium is 7% and the risk-free rate is 3%. What will be the dividend on the stock next year(D1)?
(Hint: use CAPM to compute the cost of equity )
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To find the dividend on the stock next year D1 we need to first calculate the cos...
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Step: 2
Step: 3
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Fundamentals of Managerial Economics
Authors: Mark Hirschey
9th edition
324584830, 978-0324588781, 032458878X, 978-0324584837
