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nurse15 nurse15
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A month ago
Stock Z is currently selling for $16.72. It has just paid an annual dividend of $0.80 per share, which is expected to grow at 4.5% indefinitely. The risk-free rate is 6%. The expected return on the market portfolio is 14% with a standard deviation of 17%.
a) What is the expected return on Stock Z?
b) Is Stock Z overpriced, underpriced, or correctly priced if it has a beta of 0.6?
c) Is Stock Z above, below, or on the SML?
d) What is the equilibrium price of Stock Z? Assume the dividend grow rate remains at 4.5 %.
Textbook 
Corporate Finance

Corporate Finance


Edition: 5th
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kinnigitkinnigit
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nurse15 Author
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