Essay
Suppose the risk-free real rate of return is 4%, expected inflation is 2%, the expected return on the market is 10%, and a company has a beta of 1.2. The company has just paid a dividend of $1.00, on earnings of $3.00, and its ROE is 11%. The company's stock is presently trading at $30.00.
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1st: Rf = [(1.04)(1.02)] -1 = .0608 = 6.08%...View Answer
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