Question

The risk-free rate is 2.59% and the market risk premium is 8.75%. A stock with a β of 1.32 just paid a dividend of $2.52. The dividend is expected to grow at 21.52% for three years and then grow at 3.06% forever. What is the value of the stock?

Answer #1

Required return=risk free rate+Beta*market risk premium

=2.59+(1.32*8.75)=14.14%

D1=(2.52*1.2152)=3.062304

D2=(3.062304*1.2152)=3.72131182

D3=(3.72131182*1.2152)=4.52213812

Value after year 3=(D3*Growth rate)/(Required return-Growth rate)

=(4.52213812*1.0306)/(0.1414-0.0306)

=42.0624147

Hence current price=Future dividend and value*Present value of discounting factor(rate%,time period)

=3.062304/1.1414+3.72131182/1.1414^2+4.52213812/1.1414^3+42.0624147/1.1414^3

**=$36.87(Approx).**

The risk-free rate is 2.37% and the market risk premium is
5.03%. A stock with a β of 0.87 just paid a dividend of $1.32. The
dividend is expected to grow at 24.56% for five years and then grow
at 3.38% forever. What is the value of the stock? Please show all
calculations

Part 1: The risk-free rate is 3.53% and the market risk premium
is 6.15%. A stock with a β of 0.88 just paid a dividend of $2.36.
The dividend is expected to grow at 21.73% for three years and then
grow at 4.48% forever. What is the value of the stock?
Part 2: The risk-free rate is 3.35% and the market risk premium
is 9.06%. A stock with a β of 0.98 just paid a dividend of $2.28.
The dividend...

The risk-free rate is 3.26% and the market risk premium is
5.26%. A stock with a β of 1.69 just paid a dividend of $1.09. The
dividend is expected to grow at 22.69% for three years and then
grow at 4.62% forever. What is the value of the stock?

The risk-free rate is 3.32% and the market risk premium is
7.42%. A stock with a β of 1.18 just paid a dividend of $2.18. The
dividend is expected to grow at 20.43% for three years and then
grow at 4.99% forever. What is the value of the stock?

The risk-free rate is 2.69% and the market risk premium is
8.23%. A stock with a β of 1.29 just paid a dividend of $2.04. The
dividend is expected to grow at 24.18% for three years and then
grow at 4.18% forever. What is the value of the stock?

The risk-free rate is 3.67% and the market risk premium is
5.74%. A stock with a β of 1.37 just paid a dividend of $2.57. The
dividend is expected to grow at 22.77% for three years and then
grow at 3.34% forever. What is the value of the stock?

The risk-free rate is 2.29% and the market risk premium is
6.94%. A stock with a β of 1.50 just paid a dividend of $2.65. The
dividend is expected to grow at 23.33% for three years and then
grow at 4.25% forever. What is the value of the stock?

The risk-free rate is 2.54% and the market risk premium is
9.01%. A stock with a β of 1.27 just paid a dividend of $1.90. The
dividend is expected to grow at 20.78% for three years and then
grow at 3.42% forever. What is the value of the stock?

The risk-free rate is 3.59% and the market risk premium is
6.91%. A stock with a β of 0.93 just paid a dividend of $1.71. The
dividend is expected to grow at 21.46% for three years and then
grow at 4.38% forever. What is the value of the stock?

The risk-free rate is 1.71% and the market risk premium is
6.24%. A stock with a β of 1.34 just paid a dividend of $1.37. The
dividend is expected to grow at 21.31% for three years and then
grow at 4.22% forever. What is the value of the stock?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 5 minutes ago

asked 8 minutes ago

asked 9 minutes ago

asked 11 minutes ago

asked 13 minutes ago

asked 23 minutes ago

asked 24 minutes ago

asked 29 minutes ago

asked 31 minutes ago

asked 33 minutes ago

asked 36 minutes ago

asked 38 minutes ago