Beta services typically place its beta

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Weyerhaeuser, the forest products producer, traded at $42 at the beginning of 1996. Beta services typically place its beta at 1.0 with a market risk premium of 6 percent. The riskfree rate at the end of 1995 was 5.5 percent. The ?rm was expected to pay dividends of $1.60 per share in 1996 and 1997. Use the CAPM to calculate the required return, then answer the following. a. At what price do you expect Weyerhaeuser to sell at the end of 1997 if you forecast it will pay no dividends? b. At what price do you expect Weyerhaeuser to sell at the end of 1997 if it does pay the dividends?

Reference no: EM131883088

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