Estimating the current price of BB stock
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BB Company pays a dividend of $4.00
The dividend expected growth rate for the three coming years : 6%
After the three years : 4%
The expected beta for BB stock 1.2
The risk free rate 3.00%
The market rate 9.00%
Find the estimated current price.
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Solution Summary
Solution describes the steps to estimate the current price of BB stock in the given scenario.
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Risk free rate=rf=3%
Market rate=rm=9%
Beta=b=1.2
Required rate of return=r=?
r=rf+b*(rm-rf)=3%+1.2*(9%-3%)=10.20%
Current dividend=Do=$4
Growth rate for first three ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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