## Question

# You have been directed to determine the value of Ebay's stock which is currently trading at $33.8. Ebay paid a dividend of $1.25 in the

You have been directed to determine the value of Ebay's stock which is currently trading at $33.8. Ebay paid a dividend

of $1.25 in the most recent year (Do). In addition, the risk free rate is 14% and the expected market risk premium is 3%

You have estimated Ebay's beta to be 1.2. You believe that Ebay's dividends will grow at 7% per year for the first three

and at 4% thereafter You also believe that expected market risk premium will be 5%, risk free rate will be 2.6%,

and ebays beta to be 1.4 for the constant growth period.

**Calculate the required rate of return for Ebay for the next 3 years.**

## Step by Step Solution

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