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The risk-free rate of return is 7.5%, the expected rate of return on the market portfolio is 14%, and the stock of ABC Corporation has
The risk-free rate of return is 7.5%, the expected rate of return on the market portfolio is 14%, and the stock of ABC Corporation has a beta coefficient of 1.3. ABC pays out 45% of its earnings in dividends, and the latest earnings announced were $12 per share. Dividends were just paid and are expected to be paid annually. You expect that ABC will earn an ROE of 18% per year on all reinvested earnings forever. For the auto-grader to read your answer correctly, enter your answers with two decimal points. 1. The intrinsic value of a share of ABC stock $ 2. If the market price of a share is currently $103, and you expect the market price to be equal to the intrinsic value one year from now, then your expected one-year holding-period return on ABC stock is %
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