Question

The Francis Company 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 1.70, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price? $13.44 $12.93 $17.01 $14.80 $18.03 

          The Francis Company 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 1.70, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price?
$13.44
$12.93
$17.01
$14.80
$18.03
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The Francis Company 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 1.70, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price?13.44 12.9317.01 14.8018.03

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Elementary Statistics a Step by Step Approach
Elementary Statistics a Step by Step Approach
Allan G. Bluman 9th Edition
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00:01 Hello students we are going to write here the francis companies expected to pay a dividend off so dividend value is given per share at the end of the year and the dividend is expected to grow so growth rate is 6 % per year so company's beta value is given market risk premium is given and risk free rate is given what is company's current stock price so let's start with our answering part required first we need to calculate required return on stock required return on stock as per capm that is equivalent to if i write here for this risk free rate risk free rate and this is plus death plus must be beta multiplied by market market so let's this to make it more clear, this must be market risk premium.
01:21 So basically if i write here for this, this value is 4 % plus beta value is 1 .15 multiplied by 5 .5 as percentage.
01:34 So this value would be 10 .325 as percentage.
01:40 Now if i write here for this stock price, stock price that is current that is equivalent to d1 dividend divided by required return.
01:59 Required if i write here for this return minus growth rate.
02:14 So let's erase this to make it more clear that is growth rate.
02:22 So if i write here for this, d1 is 1 .25 and this must be 10 .325 as percentage minus 6%.
02:36 So this is 1 .25 and this is 4 .325.
02:44 So as percentage...
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