Using the dividend growth model we can calculate the current price of bond | |||||
Price of shares | [D0*(1+g)]/(Ke-g) | ||||
D0 represents dividend paid today | |||||
g represents growth rate | |||||
ke represents required return on equity | |||||
Using the CAPM model we can calculate the required return on equity | |||||
Ke | Rf + Beta*(Rm-Rf) | ||||
Ke represents return of portfolio | |||||
Rf represents risk free rate of return | |||||
(Rm-Rf) represents market risk premium | |||||
Ke | 0.02 + (1.15*0.07) | ||||
Ke | 10.05% | ||||
Price of shares | [1.25*(1.055)]/(0.1005-0.055) | ||||
Price of shares | 1.31875/0.0455 | ||||
Price of shares | $28.98 | ||||
Thus, current stock price is $28.98. | |||||
Question 25 4 pts The Horizon Company just paid a dividend of $1.25 rate of 5.50$...
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5 pts Kelso Corporation just paid a dividend of Do- $0.90 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.70, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price? Your answer should be between 8.22 and 37.40, rounded to 2 decimal places, with no special characters. D Question 15 5 pts...