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15 Required Return and Stock Value The risk-free rate is 4%, and the expected return on the market is 11%. Key West Industries stock has a beta of 0.85. It expects to pay a $2.40 dividend, and the dividend is expected to grow at a rate of 4% annually. a. What is the required return on this stock? b. What should the market price of the stock be, in a competitive market?
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Risk free rate, Rf 4% Expected market return . Rm-11% Beta of stock- 0.85 Expected dividend, D1$2.40 Growth rate, g 4 Require

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