# Stock Price Determination - CAPM

The stock of Preston Inc. is expected to pay a dividend of $6.00 during the ensuing year and is expected to grow at a constant rate of 8% in the foreseeable future. Investors have recently evaluated future market return variance to be 0.0016 and the covariance of returns for Preston and the market as .00352. Assuming a required rate of return of 14% and a risk free rate of 6%, determine a price for Prestons stock.

© BrainMass Inc. brainmass.com June 3, 2020, 9:11 pm ad1c9bdddfhttps://brainmass.com/business/capital-asset-pricing-model/stock-price-determination-capm-169901

#### Solution Preview

Stock Price Determination- CAPM

The stock of Preston Inc. is expected to pay a dividend of $6.00 during the ensuing year and is expected to grow at a constant rate of 8% in the foreseeable future. Investors have recently evaluated future market return variance to be ...

#### Solution Summary

This solution is comprised of a detailed explanation to compute Prestons stock price.