The company also has 100 million ordinary shares on issue with a market price of $4 each. The market risk premium is 8% and the company has a beta of 1.5. The company just paid a dividend of 40 cents and dividends have an expected growth of 2%. Determine the required return of the ordinary equity. just please explain me for this question, when i can use DMM formula and constant-growth formula? what is the difference between them?
The company also has 100 million ordinary shares on issue with a market price of $4 each. The market risk premium is 8% and the company has a beta of 1.5. The company just paid a dividend of 40 cents and dividends have an expected growth of 2%. Determine the required return of the ordinary equity. just please explain me for this question, when i can use DMM formula and constant-growth formula? what is the difference between them?
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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The company also has 100 million ordinary shares on issue with a market price of $4 each.
The market risk premium is 8% and the company has a beta of 1.5.
The company just paid a dividend of 40 cents and dividends have an expected growth of 2%.
Determine the required return of the ordinary equity.
just please explain me for this question, when i can use DMM formula and constant-growth formula? what is the difference between them?
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