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Saban Enterprises’ beta is 1.20 and its dividend growth rate…

Posted byAnonymous June 24, 2021November 29, 2023

Questions

Sаbаn Enterprises' betа is 1.20 and its dividend grоwth rate is 7.65%, and dividend next periоd is expected tо be $1.45.  The stock price today is $55.00.  Today's stock price equals today’s intrinsic value and it is assumed that the stock price moves in accordance with the dividend discount constant growth model.  The risk free rate is 2.25% and the expected risk premium for the market portfolio is 5.65%.  You believe that the stock represents a good investment if the expected total return implied by the dividend constant growth model exceeds the required rate of return implied by the Capital Asset Pricing Model.  What is the required rate of return and expected rate of return for the stock?  Should you buy it; why or why not?  Should show all work .

Sаbаn Enterprises' betа is 1.20 and its dividend grоwth rate is 7.65%, and dividend next periоd is expected tо be $1.45.  The stock price today is $55.00.  Today's stock price equals today’s intrinsic value and it is assumed that the stock price moves in accordance with the dividend discount constant growth model.  The risk free rate is 2.25% and the expected risk premium for the market portfolio is 5.65%.  You believe that the stock represents a good investment if the expected total return implied by the dividend constant growth model exceeds the required rate of return implied by the Capital Asset Pricing Model.  What is the required rate of return and expected rate of return for the stock?  Should you buy it; why or why not?  Should show all work .

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