Talkie is a company that has a patent right for a new mobile technology that is expected
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Question:
Talkie is a company that has a patent right for a new mobile technology that is expected to
enable it to generate growth of 20% for next three years. From the beginning of year 4, the
company expects to grow at a constant rate of 5%. The company just paid a dividend of $2.20
on 31 Dec of Year 0.
(a) Compute the estimate of the current price of Talkie shares. Assume the required return
on equity is 10%.
The realized return of Talkie share and Stock M for the past 5 years are detailed below:
Year | Talkie | Stock M |
2020 | 15% | 30% |
2019 | 5% | 7% |
2018 | -5% | -3% |
2017 | 2% | -8% |
2016 | 9% | 20% |
(b) Compute the arithmetic mean and standard deviation of returns over the past 5 years for
each stock?
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