Assume that the stock is priced in equilibrium

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1. Based on the following information, what is the price at time 1 expected by investors for IWV stock? Assume that the stock is priced in equilibrium.

RF=.04

RM-RF=.08

Beta for the stock=1.5

E(D1)=$4

P0=$40

2. Tell Me Why Co. is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 7.8 percent, what is the required return on the company’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Required return %

Reference no: EM132006408

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