Miltmar Corporation will pay a year-end dividend of $4, and dividends thereafter are expected to grow at the constant rate of 4% per year. The risk-free rate is 4%, and the expected return on the market portfolio is 12%. The stock has a beta of 0.75 Required: a. Calculate the market capitalization rate. (Do not round intermediate calculations.) Market capitalization rate 4 b. What is the intrinsic value of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Intrinsic value

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Miltmar Corporation will pay a year-end dividend of $4, and dividends thereafter are expected to grow at the constant rate of 4% per
year. The risk-free rate is 4%, and the expected return on the market portfolio is 12%. The stock has a beta of 0.75
Required:
a. Calculate the market capitalization rate. (Do not round intermediate calculations.)
Market capitalization rate
%
4
b. What is the intrinsic value of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Intrinsic value
Transcribed Image Text:Miltmar Corporation will pay a year-end dividend of $4, and dividends thereafter are expected to grow at the constant rate of 4% per year. The risk-free rate is 4%, and the expected return on the market portfolio is 12%. The stock has a beta of 0.75 Required: a. Calculate the market capitalization rate. (Do not round intermediate calculations.) Market capitalization rate % 4 b. What is the intrinsic value of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Intrinsic value
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