The common stock of Leaning Tower of Pita, Inc., a restaurant chain, will generate the following payoffs

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The common stock of Leaning Tower of Pita, Inc., a restaurant chain, will generate the following payoffs to investors next year:
Stock Price Probability .3 Dividend Boom $5 $195 Normal economy .5 100 .2 Recession

The company goes out of business if a recession hits. Calculate the expected rate of return and standard deviation of return to Leaning Tower of Pita share-holders. The stock is selling today for $90.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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Fundamentals of Corporate Finance

ISBN: 978-1259024962

6th Canadian edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim

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