Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are currently considering buying the stock NPU, Inc, which has a beta of 1.22. The returns in the market are presently 13.5% and the
You are currently considering buying the stock NPU, Inc, which has a beta of 1.22. The returns in the market are presently 13.5% and the risk free rate of return 3.3%. You expect the price to rise to $31.93 in exactly 2 years. You will receive a dividend of $1.25 at the end of the first year and $1.33 at the end of the second year. Assume the growth in dividend is unpredictable and unsustainable over the years.
A. what is the return you should demand from this stock?
B. What should the stock be selling for according to your calculation?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started