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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

VALUATION Visscher currently expects to pay a year-end dividend of $1.99 a share (D1 = $1.99). Visscher’s dividend is expected to grow at a constant rate of 5% a year, and its beta is 0.8. What is the current price of Visscher’s stock?

Summary Introduction

To Determine: The current price of Corporation V’s stock.

Introduction: A stock is a common word used to represent the proprietorship statements of any organization. A share alludes to the stock declaration of a specific organization.

Explanation

Determine the required return of the stock

RequiredReturn(rs)=[RiskfreeRate(rf)+Beta(β)×MarketRiskPremium(rm)]=[4%+0.8×5%]=[4%+4%]=8%

Therefore the required return of the stock is 8%

Determine the current price of Corporation V’s stock

Curren

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