# Stock Value Using CAPM and DDM

Frazier Manufacturing paid a dividend last year of $2, which is expected to grow at a constant rate of 5%. Frazier has a beta of 1.3. If the market is returning 11% and the risk-free rate is 4%, calculate the

value of Frazier's stock.

https://brainmass.com/economics/finance/575190

#### Solution Preview

See excel spreadsheet attached.

1) We first calcuate the required return on equity using CAPM

CAPM (Capital Asset Pricing Model) equation is:

r A= r f + βA (r m - r f)

risk free rate= r f ...

#### Solution Summary

This solution calculates Stock Value using Capital Asset Pricing Model (CAPM) and Dividend Discount Model (DDM) with step-by-step workings and all formulas shown in excel file.

$2.19