You want to value the stock of Sally's Bikes, Inc. in an initial public offering. You expect the company to pay a dividend of $5 one year from now at which time you expect the stock price to be $50. You estimate the stock's beta to be 2. The expected market return is 10% and the risk free rate is 2%. 

How much would you be willing to pay for the stock?

Answer rating: 100% (QA)

To value the stock of Sallys Bikes Inc we can use the dividend discount model which states that the ... View the full answer