You are forecasting the returns for PVC Company, a plumbing supply company, which pays a current dividend of $10 The dividend is expected to grow at a rate of 3 percent You have identified two public companies, ABC and VJK that appear to be comparable to PVC ABC has the same total risk as PVC and a...

a To value PVC find a comparable firm ABC while having the same total ris ...

You are forecasting the returns for PVC Company, a plumbing supply company, which pays a current dividend

Question:

You are forecasting the returns for PVC Company, a plumbing supply company, which pays a current of $10. The is expected to grow at a rate of 3 percent. You have identified two public companies, ABC and VJK that appear to be comparable to PVC. ABC has the same total risk as PVC and a beta of 1.2. VJK, in contrast, has a very different total risk but the same market risk as PVC. VJK’s beta is 0.75. The market risk premium is 5 percent and the risk-free rate is 1 percent.
a. Determine the required return for PVC using the appropriate beta.
b. Determine the price of PVC.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...