17. Gummo Corporation just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 6.5% per year. The company's beta is 0.95, the required return on the market is 10.5%, and the risk-free rate is 4.5%. What is the company's current stock price?
a) 10.02
b)20.27
c)9.40
d)21.59
e)16.98
required return= risk-free rate +Beta*(market rate- risk-free rate )
=4.5+0.95*(10.5-4.5)
=10.2%
Current price=D1/(Required return-Growth rate)
=(0.75*1.065)/(0.102-0.065)
which is equal to
=$21.59(Approx).
17. Gummo Corporation just paid a dividend of $0.75 per share, and that dividend is expected...
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