6. The Francis Company is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.70, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price?
Ans $ 17.01
| P0 = | Price of Share |
| D1 = | Current Dividend |
| Ke = | Cost of Equity |
| g = | growth rate |
| P0 = | D1 / (Ke - g) |
| P0 = | 1.25 / ( 13.35% - 6%) |
| P0 = | 17.01 |
| Cost of Equity = | Risk free Return + (Market Return - Risk free return)* Beta | ||
| Cost of Equity = | 4% + 5.5% * 1.70 | ||
| Cost of Equity = | 13.35% | ||
6. The Francis Company is expected to pay a dividend of D1 = $1.25 per share...