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Beta of the Stock

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Question: My company's stock is now selling for $40 a share. The stock is expected to pay $2 dividend at the end of the year. The stock's dividend is expected to grow at a constant rate of 7% a year forever. The risk-free rate is 6% and the market risk premium is also 6%. What is the stock's beta?

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Solution Summary

Using the CAPM equation, this solution illustrates how to calculate the beta of the stock. All steps and variables which are required are outlined.

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Using CAPM
Cost of equity = Rf + Market risk premium X beta

To calculate the beta, we need the ...

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