Lee' food fair's stock has a beta value of 1.5 last year the company paid a dividend
Question:
Lee' food fair's stock has a beta value of 1.5 last year the company paid a dividend of $2.30 and expects a constant growth rate of 5% in dividends per share, earnings and stock price. assume that the current risk free rate is 7% and market risk premium is 6%
i) Calculate the required rate of return for the stock?
ii) What is the equilibrium price of the stock?
b) A telecommunication company is expected to enjoy dividend growth of 22% for next 2 years, after which the dividend growth is expected to follow a constant rate of 8%. the company last dividend was $1.75 and stockholder's required rate of return is 15%.
i) Calculate intrinsic value of stock today.
Fundamentals of Investing
ISBN: 978-0133075359
12th edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk