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You are considering an investment in MBC Group's stock, which is expected to pay a dividend of $3.96 a share at the end of the year (D1 = $3.96) and has a beta of 1.1. The risk-free rate is 5%, and the market risk premium is 6.5%. The firm currently sells for $36.00 a share, and its dividend is expected to grow at some constant rate g. 16. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 4 years? * A) $36.115 B) $37.68 C) $41.4 D) $36

You are considering an investment in MBC Group's stock, which is expected to pay a dividend of $3.96 a share at the end of the year (D1 = $3.96) and has a beta of 1.1. The risk-free rate is 5%, and the market risk premium is 6.5%. The firm currently sells for $36.00 a share, and its dividend is expected to grow at some constant rate g. 16. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 4 years? * A) $36.115 B) $37.68 C) $41.4 D) $36

Essentials Of Investments
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
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You are considering an investment in MBC Group's stock, which is expected to pay a dividend of $3.96 a share at the end of the year (D1 = $3.96) and has a beta of 1.1. The risk-free rate is 5%, and the market risk premium is 6.5%. The firm currently sells for $36.00 a share, and its dividend is expected to grow at some constant rate g. 16. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 4 years? * A) $36.115 B) $37.68 C) $41.4 D) $36 E) None of the above
Transcribed Image Text:You are considering an investment in MBC Group's stock, which is expected to pay a dividend of $3.96 a share at the end of the year (D1 = $3.96) and has a beta of 1.1. The risk-free rate is 5%, and the market risk premium is 6.5%. The firm currently sells for $36.00 a share, and its dividend is expected to grow at some constant rate g. 16. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 4 years? * A) $36.115 B) $37.68 C) $41.4 D) $36 E) None of the above
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