A firm recently paid a dividend of $2.65 per share, but analysts expect the dividend to increase by 5% per year. The risk free rate is 2.5% and the market risk premium is 8%. If its beta is 1.65 and the market is in equilibrium what is the value of the stock?
A firm recently paid a dividend of $2.65 per share, but analysts expect the dividend to increase by 5% per year. The risk free rate is 2.5% and the market risk premium is 8%. If its beta is 1.65 and the market is in equilibrium what is the value of the stock?
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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Transcribed Image Text:Question 23
A firm recently paid a dividend of $2.65 per share, but analysts expect the dividend to
increase by 5% per year. The risk free rate is 2.5% and the market risk premium is 8%.
If its beta is 1.65 and the market is in equilibrium what is the value of the stock?
$12.16
O $17.72
$11.04
$24.77
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