Question

Really need help, thanks. 2decimal places

"The risk-free rate is 1.19% and the market risk premium is 9.68%. A stock with a β of 0.93 just paid a dividend of $1.45. The dividend is expected to grow at 20.82% for three years and then grow at 3.13% forever. What is the value of the stock?"

Answer 1

Market Risk premium = 9.68% Risk free rate (Rf) = 1.19% Bela (B) = .93 Cost of equity = Rs + (Market risk premium) & Beta = 119 + (968) + .93 = 10-19 l. Diridendo = 1045 Dividendy = 1.45*(1+.2002) = 1.75 Dividenda = 1075 * (1+:2082) = 2.12 Dir dend a = 2-12 *(1+.2082) = 2-56 Diridend 4 = 2056* (1+.0313) = 2.64 Price at (+=3) + Dividendz Diriden d3 cash flow at time = 3) = share Dividendy Tot of + Cost of equity - growth rate 2.64 +2.56 1019-033 37.39 + 2.56 39.95 = Value 1.75 + 39.95 +2.12 + Jo 1019² Tez 1.75 101019 To10193 1:59 + 1.75 + 29.86 $33.20 Answer =