Gomi Waste Disposal stock is currently priced at 85.8 dollars per share and is expected to pay its next dividend, which is expected to be 4.38 dollars, in 1 year. The stock has a risk premium of 10.64 percent, the risk-free rate is 7.29 percent, and inflation is expected to be 4.88 percent. What is the stock price of Gomi Waste Disposal expected to be in 1 year?
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First, let's calculate the required rate of return for Gomi Waste Disposal stock. The required rate of return is the risk-free rate plus the risk premium. Risk-free rate + Risk premium = Required rate of return Assuming the risk-free rate is 2%, we can Show more…
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