ABC Corporation has a current stock price of $20.87 and is expected to pay a dividend...
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ABC Corporation has a current stock price of $20.87 and is expected to pay a dividend of $1.00 in one year. Its expected stock price right after paying that dividend is $23.04. The market risk premium is 15% and the risk-free rate is 5%. Required: 1. Assuming the stock is correctly priced, what is ABC's expected return? 2. How much of ABC's required return is expected to be satisfied by dividend yield? 3. How much of ABC's required return is expected to be satisfied by capital gains? 4. If the stock is correctly priced, what should be the beta of ABC Corporation? ABC Corporation has a current stock price of $20.87 and is expected to pay a dividend of $1.00 in one year. Its expected stock price right after paying that dividend is $23.04. The market risk premium is 15% and the risk-free rate is 5%. Required: 1. Assuming the stock is correctly priced, what is ABC's expected return? 2. How much of ABC's required return is expected to be satisfied by dividend yield? 3. How much of ABC's required return is expected to be satisfied by capital gains? 4. If the stock is correctly priced, what should be the beta of ABC Corporation?
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Related Book For
South western Federal Taxation 2018 Corporations Partnerships Estates and Trusts
ISBN: 978-1337385985
41st edition
Authors: William H. Hoffman, William A. Raabe, James C. Young, Annette Nellen, David M. Maloney
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