Blast! stock has a beta of 1.4 and is currently selling for $16. Your DCF analysis indicates that Blast! will trade at $18.5 a year from today and you expect that the company will pay a dividend of $1 for the year. If the risk-free rate is 0.05, and the market risk premium is 0.1, what is the alpha of this stock?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 5P: A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s...
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Blast! stock has a beta of 1.4 and is currently selling for $16. Your DCF analysis indicates that Blast! will trade at $18.5 a year from today and you expect that the company will pay a dividend of $1 for the year. If the risk-free rate is 0.05, and the market risk premium is 0.1, what is the alpha of this stock?

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