Purchase Solution

# Expected Rate of Return and Constant Growth Model

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Use the CAPM to calculate the Expect Rate of Return = "r"

Based on the assumptions that:

Risk Free Rate = 3.50% Rf
Market Return = 12.00% Rm

We found the Beta of AB 217 Corp = 0.85
SO
CAPM = Rf + Beta(RM - Rf) r = Question 1

This will be the "r" value that is used in the CGM.

Estimate the value of "g" ... the constant growth rate ..

Calculate the Dividend Growth Rate of AB 217 for Constant Growth Model (CGM)
We use actuall AB 217 history

PV (\$1.20) Dividend paid 6 years ago. Negative so Excel can do the math
FV \$1.55 Dividend paid this year = Do)
n 6
PMT 0
Rate This will be the Dividend Growth Rate ... = g Question 2

Constant Growth Model

Estimate the value of AB 217 stock using the CGM

D1 = Question 3

Po = #DIV/0! Question 4

##### Solution Summary

The expected rate of return and constant growth models are examined. The risk free rate are provided.

##### Solution Preview

1. CAPM = r = Rf + Beta(Rm-Rf) = 0.035 + 0.85(0.12-0.035) = ...

##### Measures of Central Tendency

This quiz evaluates the students understanding of the measures of central tendency seen in statistics. This quiz is specifically designed to incorporate the measures of central tendency as they relate to psychological research.

##### Measures of Central Tendency

Tests knowledge of the three main measures of central tendency, including some simple calculation questions.