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You are given the following information for ABC Inc.: (1) The risk free rate is 5%. (2) The rate of return on the market is
You are given the following information for ABC Inc.:
(1) The risk free rate is 5%.
(2) The rate of return on the market is 8%.
(3) The expected growth rate in dividends is 4%.
(4) The last dividend paid was $0.80 per share.
(5) Beta is 1.0
a) What price should ABC sell for today? (8 pts)
b) What price should ABC sell for, if the growth rate in dividends increase to 6% and beta increases to 1.5. (6 pts)
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