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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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 ...

Solution Summary

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

$2.49