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Calculate fountain required return on equity

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Reference no: EM132942685

Question - The Deltin Corporation is currently paying a dividend of $2.50 per share. The dividend is expected to grow at a constant 4 percent per year. The risk-free rate of return is 1.50 percent and the equity risk premium is 7.50 percent. Fountain's beta is 1.25.

1) Use the Capital Asset Pricing Model to calculate Fountain's required return on equity.

2) Estimate the price of Deltin stock.

Reference no: EM132942685

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