# 29 Suppose the risk-free rate is 2.12% and an analyst assumes a market risk premium of 5.18%. Firm A just paid a dividend of $1.09 per share. The analyst estimates the B of Firm A to be 1.48 and estimates the dividend growth rate to be 4.49% forever. Firm A has 262.00 million shares outstanding. Firm B just paid a dividend of $1.82 per share. The analyst estimates the B of Firm B to be 0.72 and believes that dividends will grow at 2.61% forever. Firm B has 182.00 million shares outstanding. What is the value of Firm A? Submit Answer format: Currency: Round to: 2 decimal places.
# 29 Suppose the risk-free rate is 2.12% and an analyst assumes a market risk premium of 5.18%. Firm A just paid a dividend of $1.09 per share. The analyst estimates the B of Firm A to be 1.48 and estimates the dividend growth rate to be 4.49% forever. Firm A has 262.00 million shares outstanding. Firm B just paid a dividend of $1.82 per share. The analyst estimates the B of Firm B to be 0.72 and believes that dividends will grow at 2.61% forever. Firm B has 182.00 million shares outstanding. What is the value of Firm A? Submit Answer format: Currency: Round to: 2 decimal places.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Transcribed Image Text:#29
Suppose the risk-free rate is 2.12% and an analyst
assumes a market risk premium of 5.18%. Firm A just
paid a dividend of $1.09 per share. The analyst
estimates the B of Firm A to be 1.48 and estimates the
dividend growth rate to be 4.49% forever. Firm A has
262.00 million shares outstanding. Firm B just paid a
dividend of $1.82 per share. The analyst estimates the B
of Firm B to be 0.72 and believes that dividends will
grow at 2.61% forever. Firm B has 182.00 million shares
outstanding. What is the value of Firm A?
Submit
Answer format: Currency: Round to: 2 decimal places.
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