You are considering buying common stock in Grow On, Inc. You have projected that the next dividend the company will pay will equal $4.90 and that dividends will grow at a rate of 5.0% per year thereafter. The firm's beta is 2.05, the risk-free rate is 5.6%, and the market return is 14.0%. What is the most you should pay for the stock now?
You are considering buying common stock in Grow On, Inc. You have projected that the next dividend the company will pay will equal $4.90 and that dividends will grow at a rate of 5.0% per year thereafter. The firm's beta is 2.05, the risk-free rate is 5.6%, and the market return is 14.0%. What is the most you should pay for the stock now?
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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