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Axel is expected to remain an annual dividend of $4.20. What is Axel's stock value if...

Axel is expected to remain an annual dividend of $4.20. What is Axel's stock value if the T-bill rate is 7% and Axel stock's risk premium is 5%?

Stock Value = ?
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Answer #1

stock return = risk free rate + risk premium

= 7% + 5%

= 12%

stock value = annual dividend/stock return

= 4.2/0.12

= 35

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