Assume now that CAPM holds. You need to estimate the price of one stock of company...

 

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Assume now that CAPM holds. You need to estimate the price of one stock of company XYZ. You expect that this company's earnings per share will be $4 in one year, your estimation of Present Value of Growth Opportunities today is $40. The company has just paid out the dividend for the previous financial year. Expected return of market portfolio is equal to 20%, its standard deviation is equal to 55% and covariance between the returns on XYZ and market portfolio is 0.5. The risk-free rate is 5%. Find the price of a stock. Assume now that CAPM holds. You need to estimate the price of one stock of company XYZ. You expect that this company's earnings per share will be $4 in one year, your estimation of Present Value of Growth Opportunities today is $40. The company has just paid out the dividend for the previous financial year. Expected return of market portfolio is equal to 20%, its standard deviation is equal to 55% and covariance between the returns on XYZ and market portfolio is 0.5. The risk-free rate is 5%. Find the price of a stock. Assume now that CAPM holds. You need to estimate the price of one stock of company XYZ. You expect that this company's earnings per share will be $4 in one year, your estimation of Present Value of Growth Opportunities today is $40. The company has just paid out the dividend for the previous financial year. Expected return of market portfolio is equal to 20%, its standard deviation is equal to 55% and covariance between the returns on XYZ and market portfolio is 0.5. The risk-free rate is 5%. Find the price of a stock. Assume now that CAPM holds. You need to estimate the price of one stock of company XYZ. You expect that this company's earnings per share will be $4 in one year, your estimation of Present Value of Growth Opportunities today is $40. The company has just paid out the dividend for the previous financial year. Expected return of market portfolio is equal to 20%, its standard deviation is equal to 55% and covariance between the returns on XYZ and market portfolio is 0.5. The risk-free rate is 5%. Find the price of a stock.

Answer rating: 100% (QA)

The price of a stock of company XYZ can be estimated using the Capital Asset Pricing Mode... View the full answer