Homework Answers
D1 = 3.12(1.16) = $3.62
Calculating Cost of Equity using CAPM Model,
Cost of Equity = 0.04 + 1.30(0.048) = 10.24%
Horizon Value = 3.62(1.032)/(0.1024 - 0.048) = $68.67
Intrinsic Value = (3.62 + 68.67)/(1.1024)
Intrinsic Value = $65.58
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