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A company has promised a dividend of $1.50. next year. The growth rate for the company...

A company has promised a dividend of $1.50. next year. The growth rate for the company is projected to be 1.5% annually. The beta of the company stock is 0.75. The market return is expected to be 6% and the risk free rate is 1.5% What should the fair price of the stock be?

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Expert Solution

Required return = 1.5% + 0.75 * (6% - 1.5%) = 4.875%

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jeff jeffy answered 2 years ago
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