Question
You are considering investing in Starbucks Bond or Stock? The Starbucks bond matures in 10 years and your yield to maturity is 2.4%. Starbucks current
You are considering investing in Starbucks Bond or Stock? The Starbucks bond matures in 10 years and your yield to maturity is 2.4%. Starbucks current stock price is $115, with a beta of 0.88 and dividend that will be paid next year of $1.80. Assume that a 10 year US Govt Bond has an yield of 1.65%.
Calculate the Starbucks Stock price using the Gordon's growth model/growing perp. formula assuming a 4% dividend growth rate? Should you buy the stock based on this calculated value? Why?
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Personal Finance
Authors: Thomas Garman, Raymond Forgue
12th edition
9781305176409, 1133595839, 1305176405, 978-1133595830
