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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 Preview

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

    To calculate the beta, we need the ...

    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.