Explore BrainMass

Explore BrainMass

    Expected return and price

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Weyerhaeuser, The forest products producer, traded at $42 at the beginning of 1996. Beta services typically place its beta at 1.0 with a market risk premium of 6 percent. The risk free rate at the end of 1995 was 5.5 percent. The firm was expected to pay dividends of $1.60 per share in 1996 and 1997. Use CAPM to calculate the expected return, and at what price you expect Weyerhaeuser to sell at the end of 1997 if you forecast that it will pay no dividends?

    © BrainMass Inc. brainmass.com June 3, 2020, 11:24 pm ad1c9bdddf

    Solution Preview

    Using CAPM
    Required return = Rf + (Rm-Rf) beta
    Required return = 5.5% + 6% X 1 ...

    Solution Summary

    The solution explains how to calculate the expected return on a stock and its price.