Homework Answers
Price of STock = D1 / [ Ke - g ]
Ke = Rf + Beta [ Rm - rf ]
= 6.7% + 2.28 [ 15.8% - 6.7% ]
= 6.7% + 2.28 [ 9.1% ]
= 6.7% +20.75%
= 27.45%
Price of STock = D1 / [ Ke - g ]
= 5.60 / [ 27.45 - 7% ]
= 5.60 / 20.45%
= 27.38
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