Company XYZ just paid $2.00 dividend. You believe that the dividend will grow by 5% per year
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Question:
Company XYZ just paid $2.00 dividend. You believe that the dividend will grow by 5% per year forever.
a. If you require 10% return on this investment, what is the stock price?
b. How would your answer if you hold the stock for 2 years and then sell it for $30.
You'd like to invest in Apple Inc. (AAPL). You look at Yahoo Finance and you'll see the beta of Apple is 1.45.
a. If risk free rate is 3% and the expected return on S&P500 (market) is 9%, what is your expected rate of return to invest in Apple Inc.?
b. Assume the real expected return of Apple Inc. is 18%. Is Apple Inc. overvalued, undervalued or correctly valued?
Expert Answer:
Company XYZ just paid 200 dividend You believe that the dividend will grow by 5 per year forever a To calculate the stock price we can use the dividen... View the full answer
Related Book For 
Financial Analysis with Microsoft Excel
ISBN: 978-1285432274
7th edition
Authors: Timothy R. Mayes, Todd M. Shank
Posted Date:
