Paunch Burger has a beta of 1.2 and just paid a dividend of $2.30 that is expected to grow at 3.2%. If the risk-free rate is 3% and the market risk premium is 6%, what should be the price of the stock?
A. $69.81
B. $39.69
C. $32.86
D. $33.91
Required rate=risk free rate+Beta*market risk premium
=3+(1.2*6)=10.2%
Current price=D1/(Required return-Growth rate)
=(2.3*1.032)/(0.102-0.032)
=$33.91(Approx).
Paunch Burger has a beta of 1.2 and just paid a dividend of $2.30 that is...
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