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.
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 ...
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.