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    Price of a stock

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    Next years didvidend for ERT stock is expected to be $4.00. You expect it to be $4.00 in 2 years, also, but then you expect it to grow at an 8% annual rate forever. If the risk-free rate of interest is 1%, the expected market return is 9%, and the ERT's beta is 2.0 then what is the price of the stock today?

    © BrainMass Inc. brainmass.com June 3, 2020, 5:33 pm ad1c9bdddf
    https://brainmass.com/business/accounting/price-of-a-stock-30507

    Solution Preview

    First calculate the rate of return required on ERT using CAPM
    r = rf + ...

    $2.19

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