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the stock KZ has an equity beta of 1.8. the market risk premium is 5% and the current risk-free rate is 3%. The company is
the stock KZ has an equity beta of 1.8. the market risk premium is 5% and the current risk-free rate is 3%. The company is going to pay for the following dividends for the next 4 years; $12 for year 1, $9 for year 2, $6 for year 3 and $2 for year 4. Afterwards it would maintain a 5% growth rate in dividends forever.
(a) determine the required rate of return for the stock
(12%?)
(b) compute the maximum price you would pay for this stock today
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