Answer: Overpriced by 4.79, Overpriced by 4.36
Using Value Line
Price should be
=0.60/(2.8%+1.51*4.8%-3%)
=8.51
Overpriced by 13.30-8.51=4.79
Using Yahoo
Price should be
=0.60/(2.8%+1.44*4.8%-3%)
=8.94
Overpriced by 13.30-8.94=4.36
Beta and Value A firm is expected to pay an annual dividend of $.60 next year....
Chapter 13 Practice Test Question 17 Beta and Value A firm is expected to pay an annual dividend of $.60 next year. After next year the firm's dividends will grow at a steady state rate of 3% per year. You are trying to value the stock and Value Line lists a stock beta of 1.51 while Yahoo is reporting a beta of 1.44. The stock is currently priced at $13.30. If E(RM) - Rf = 4.8% and the risk free...
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