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Dyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.95, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is Dyer's current stock price? Select the correct answer. a. $13.66 b. $12.32 c. $11.65 d. $12.99 e. $14.33

Respuesta :

Ritmeks

Answer:

$11.65

Explanation:

The first step is to calculate the return

= 4/100 + 1.95(5.50/100)

= 0.04 + 1.95(0.055)

= 0.04 + 0.10725

= 0.14725

The stock price can be calculated as follows

= 1.25/0.14725-0.04

= 1.25/0.10725

= $11.65

Hence the stock price is $11.65

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