ABC, Inc. is expected to pay an annual dividend per share of $3.50, and investors require...
ABC, Inc. is expected to pay an annual dividend per share of
$3.50, and investors require a rate of return on S&P500 index
is 10%, with the T-bill rate at 5%. What should be the current
share price of ABC's stock if ABC's beta is 1.6, with a growth rate
of 6%? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
Share Price = ?
Homework Answers
Required return=risk free rate+beta*(market rate-risk free rate)
=5+1.6*(10-5)
=13%
Current price=D1/(Required return-Growth rate)
=3.5/(0.13-0.06)
=$50
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