3. Antigone Inc. paid out a dividend of $1.75, and analysts expect it to grow at 6% for the foreseeable future. The market rate is 17%, the T-Bill rate is quoted at 4%, and Antigone stock is selling at $15.50 (beta 1.2). Answer the following questions:

a) What is the expected return on Antigone stock?

b) Are Antigone shares overpriced, underpriced, or correctly priced?

c) Is Antigone stock above, below, or on the SML?

d) What is the equilibrium price of Antigone stock?

Answer rating: 100% (QA)

To answer the questions we need to calculate the expected return on Antigone stock compare it to the market rate determine if the shares are overprice... View the full answer