Explore BrainMass

Explore BrainMass

    Stock Value Today Using the Beta and Growth Rate

    Not what you're looking for? Search our solutions OR ask your own Custom question.

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

    Next year's dividend for ERT stock is expected to be $4.00. You expect it to be $4.00 in 2 years, also, but then you expect it to grow at an 8% annual rate forever. If the risk-free rate of interest is 1%, the expected market return is 9%, and the ERT's beta is 2.0 then what is the price of the stock, today?

    © BrainMass Inc. brainmass.com March 4, 2021, 6:08 pm ad1c9bdddf

    Solution Preview

    Answer: 41.41

    First calculate the required rate of return r

    r = r f + beta (r m - r f)

    r f = 1%
    beta A= 2
    r ...

    Solution Summary

    All the calculations to find the current price of the stock described are shown in addition to the Excel sheet used to calculate them.