Based on the following information about SOB's common stock, Last dividend per share: $4 Dividend growth...
Based on the following information about SOB's common stock,
Last dividend per share: $4
Dividend growth rate: 3%
Beta for the stock: 1.15
Risk free rate: 5%
Market risk premium: 8%
What is the expected price per share in 4 years?
Select one:
a. $47.09
b. $50.54
c. $41.40
d. $44.77
Please explain steps, thank you!
Homework Answers
Expected return = risk free rate + beta * market risk premium
= 5% + 1.15 * 8%
= 14.2%
Price in 4 years = dividend next year/(Required return - growth rate)
= 4 * 1.03^5/(0.142 - 0.03)
= 41.40
choose c)
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