 # What would be the stock value? Anonymous
account_balance_wallet \$5

### Question Description

what would be the stock value if the growth rate is 10%, but pcns beta falls to:

1.0?

0.5?

12.9

anusha_reddy
School: University of Virginia   (Taking Growth (g) 10% and beta 1.0)

Ke = RF + MRP*B

Ke = 0.06+0.06*1.0 = 0.12 = 12%

Price = D0*(1+g)/Ke

Price = 2(1.10)/0.12 = \$18.33

(ii)

(Taking Growth (g) 10% and beta 0.5)

Ke = RF + MRP*B

Ke = 0.06+0.06*0.5 = 0.09 = 9%

Price = D0*(1+g)/Ke

Price = 2(1.10)/0.09 = \$24.44

flag Report DMCA  Review Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable. Brown University

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