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The required return on investment is correct. I don't know how to find the value of the company's stock Assume a major investment service has
The required return on investment is correct. I don't know how to find the value of the company's stock
Assume a major investment service has just given Big Lake Realty its highest investment rating, along with a strong buy recommendation. As a result, you decide to take a look for yourself and to place a value on the company's stock. Here's what you find: This year, Big Lake paid its stockholders an annual dividend of $3.69 a share, but because of its high rate of growth in earnings, its dividends are expected to grow at the rate of 9% a year for the next five years and then to level out at 6% a year. So far, you've learned that the stock has a beta of 1.25, the risk-free rate of return is 2.5%, and the expected return on the market is 10.6%. Using the CAPM to find the required rate of return, put a value on this stock. Using the CAPM, the required rate of return on the investment is 12.63 %. (Round to two decimal places.) The value of the company's stock is $ (Round to the nearest cent.)Step by Step Solution
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