You have an opportunity to invest in a deal that will make yearly payments forever. These payments will grow at a rate of 5% per year. You will receive your first payment of 8,000 one year from today. Due to the risks associated with this investment, you will require a return of 15%. How much are you willing to pay for this deal today?
Select one:
a. 85,000
b. 80,000
c. 87,500
d. 100,000
.
The firm makes no use of debt and is entirely financed by common stock with a beta of 2. The expected return on the market portfolio is 10% and the risk-free rate is 3%. The required rate of return is
Select one:
a. 16%
b. 17%
c. 15%
d. 10%
.
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