Billings Metals Corp. just paid a $4.40 dividend to its common stockholders. You expect these dividends...
Billings Metals Corp. just paid a $4.40 dividend to its common stockholders. You expect these dividends to grow at a constant annual rate of 5% indefinitely. Assume the risk-free rate is 3% and the market risk premium is 7%. If Billings Metals has a beta of 0.8, what is the intrinsic value of its common stock?
Select one: a. $128.33 b. $46.20 c. none of the above d. $82.50
Homework Answers
| Intrinsic Value = a. $128.33 |
| Dear Student |
| Thank you for using Chegg |
| Please find below the answer |
| Statementshowing Computations |
| Paticulars |
| ke = Rf + Beta (MRP) |
| ke = 3% + .80*7% |
| ke = 3% + 5.6% |
| ke = 8.6% |
| Intrinsic value P0 = D1/(ke-g) |
| P0 = 4.4*1.05/(8.6%-5%) |
| P0 = 4.62/(3.6%) |
| P0 = $128.33 |
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