Multiple Choice
Estee Lauder's upcoming dividend is expected to be $0.65 and its stock is selling at $45. The firm has a beta of 1.1 and is expected to grow at 10 percent for the foreseeable future. Compute Estee Lauder's required return using both CAPM and the constant growth model. Assume that the market portfolio will earn 11 percent and the risk-free rate is 4 percent.
A) CAPM: 11.2 percent; Constant Growth Model: 10.97 percent
B) CAPM: 11.7 percent; Constant Growth Model: 11.44 percent
C) CAPM: 10.1 percent; Constant Growth Model: 11.46 percent
D) CAPM: 9.2 percent; Constant Growth Model: 9.56 percent
Correct Answer:
Verified
Correct Answer:
Verified
Q1: The annual return on the S&P 500
Q2: A company has a beta of 0.25.
Q4: Compute the expected return and standard
Q5: Which of the following is typically considered
Q6: Which of the following is the asset
Q7: You own $7,000 of Diner's Corp. stock
Q8: The constant growth model assumes which of
Q9: Which of the following is the use
Q10: Which of these is a theory that
Q11: Which of the following is a true