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Roulette Enterprises: what is the highest price an investor would pay for their shares?

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Roulette Enterprises expects to pay a perpetual annual dividend of 65c. The beta of their stock has been calculated ex-post to be 0.8. If the market-risk premium and risk free rate were 8% p.a. and 7% p.a. respectively, what is the highest price an investor would pay for their shares?

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The solution shows all the calculations to arrive at an answer to the problem. The highest price an investor would pay is determined.

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Roulette Enterprises expects to pay a perpetual annual dividend of 65c. The beta of their stock has been calculated ex-post to be 0.8. If ...

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