Miltmar Corporation will pay a year-end dividend of $4, and dividends thereafter are expected to grow at a constant rate of 4% per year. The risk-free rate is 4%, and the expected return on the market portfolio is 12%. The stock has a beta of 0.75. What is the intrinsic value of the stock?
Added by Beatriz G.
Step 1
75 * (12% - 4%) Required Rate of Return = 4% + 0.75 * 8% Required Rate of Return = 4% + 6% = 10% Show more…
Show all steps
Your feedback will help us improve your experience
Rachel Gore and 54 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
A stock is expected to pay $1.5 dividend in 1 yr from today and its dividend is expected to grow at a constant rate 8%. If the beta for this stock is 1.5, risk free return is 1%, and market risk premium is 9%, what is the current fair value of this stock today and what will be the fair value of this stock fours yrs from now?
Akash M.
A company currently pays a dividend of $\$ 2$ per share, $D_{0}=\$ 2 .$ It is estimated that the company's dividend will grow at a rate of $20 \%$ per year for the next 2 years, then the dividend will grow at a constant rate of $7 \%$ thereafter. The company's stock has a beta equal to $1.2,$ the risk-free rate is $7.5 \%$, and the market risk premium is $4 \% .$ What is your estimate of the stock's current price?
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD