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Using the CAPM Fantasia Corp. has a beta of 1.7. The prevailing
risk-free rate is 5% and the market risk
premium is 5%. What is the required rate of
return of Fantasia Corp. according to the
CAPM’? R, =Rf+sJ(R_ 42,) Quick quiz I Y technology‘s stock is expected to pay a
dividend of $2 per share at the end of the year.
The stock currently has a price of $40 per share,
and the stock's dividend is expected to grow at
a constant rate of 9 percent. a year. The stock
has a beta of 1.2. The market risk premium is
7% and the risk free rate is 5%. What would be
the expected stock price 5 years from today? -M
Non Constant growth I Meter homes is in a stage of abnormally high growth due
to a surge in the demand for homes. The company
expects the dividends to grow at a rate of 20% for the
next four years, after which there will be no growth in
earnings and dividends. The last paid dividend was
$1.50. The beta is 15, the return on the market is
currently 12.75% and the risk free rate is 4%. What
should be the price of the stock? ...
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- Spring '10