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What is the opportunity cost of capital? A share of stock with a beta of 0.73 now sells for $50. Investors expect the stock to
What is the opportunity cost of capital?
A share of stock with a beta of 0.73 now sells for $50. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 6 ? and the market risk premium is 9%. a. Suppose investors believe the stock will sell for $52 at year-end. Calculate the opportunity cost of capital. Is the stock a good o bad buy? What will investors do? b. At what price will the stock reach an "equilibrium" at which it is percelved as farrly priced today? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Suppose investors believe the stock will sell for $52 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? Note: Do not round intermediate calculations. Round your opportunity cost of capital calculation as a percentage rounded to 2 decimal placesStep by Step Solution
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