Calculate the value estimate of pirate vision stock

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Reference no: EM132050207

1. A stock is currently priced at $55. A call option with an expiration of one year has an exercise price of $60. The risk-free rate is 12 percent per year, compounded continuously, and the standard deviation of the stock’s return is infinitely large. What is the price of the call option?

2. You expect Pirate Vision to have a ROE of 14%, a beta of 1.25, an expected earnings per share (E1) of $4.75, and a stable dividend payout ratio of 45%. The expected market risk premium is 9%, and the 10-year Treasury note yield is 2.05%. Calculate the value estimate of Pirate Vision stock (V0) according to the constant growth DDM?

Reference no: EM132050207

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