The current risk-free rate is 3 percent and the market risk premium is 5 percent. You are
Question:
The current risk-free rate is 3 percent and the market risk premium is 5 percent. You are trying to value ABC company and it has an equity beta of .9. The company earned $2.50 in the year that just ended. You expect the company's earnings to grow 4 percent per year. The company has an ROE of 12 percent.
a. What is the value of the stock?
b. What is the present value of the growth opportunity?
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RFR 3 Market risk premium 5 Equity beta 9 Earnings per share 250 Growth rate 4 R...View the full answer
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Related Book For 
Investment Analysis and Portfolio Management
ISBN: 978-1305262997
11th Edition
Authors: Frank K. Reilly, Keith C. Brown, Sanford J. Leeds
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