What is the value of a common stock if: a. the firm's earnings and dividends are growing annually at 4 percent, the current dividend is $1.32, and investors require 8 percent return on investments in common stock? b. What is the value of this stock if you add risk to the analysis and the firm's beta coefficient is 0.8, the risk-free rate is 1.5 percent, and the return on the market is 8.5 percent? c. If the price of the stock is $35, what is the rate of return offered by the stock? Should the investor acquire this stock?
What is the value of a common stock if: a. the firm's earnings and dividends are growing annually at 4 percent, the current dividend is $1.32, and investors require 8 percent return on investments in common stock? b. What is the value of this stock if you add risk to the analysis and the firm's beta coefficient is 0.8, the risk-free rate is 1.5 percent, and the return on the market is 8.5 percent? c. If the price of the stock is $35, what is the rate of return offered by the stock? Should the investor acquire this 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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What is the value of a common stock if:
a. the firm's earnings and dividends are growing annually at 4 percent, the current dividend is $1.32, and investors require 8 percent
b. What is the value of this stock if you add risk to the analysis and the firm's beta coefficient is 0.8, the risk-free rate is 1.5 percent, and the return on the market is 8.5 percent?
c. If the price of the stock is $35, what is the
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