j A share of stock sells for $54 today. The beta of the stock is 0.8...

Question

Question

A share of stock sells for $54 today. The beta of the stock is 0.8 and the expected return on the market is 17 percent. The s j

Answer 1

Answer #1

first let us know the cost of equity:.

risk free rate + beta*(market return - risk free rate)

=>5.3% +0.80*(17%-5.3%)

=>14.66%.

growth rate = cost of equity - (dividend to be paid / price)

=>0.1466 - (1.10/54)

=>0.12622963.

price after one year = current price *(1+ growth rate)^1

=>54*(1.12622963)^1

=>$60.82.

> Best way to find the answer

Justice7 Wed, Dec 8, 2021 9:39 AM

Answer 2

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