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What is star market capitalization rate

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Reference no: EM133056989

Starry Night Inc. (STAR) pays out 50% of its earnings in dividends. Its latest announced earnings were $20 per share. Dividends were just paid and are expected to be paid annually. You expect that STAR will earn an ROE of 21% per year on all reinvested earnings forever. STAR's stock has a beta of 2.1 The risk-free rate is 10.0%, and the expected rate of return on the market portfolio is 15%.

a. What is STAR's market capitalization rate?

b. What is the (expected) growth rate of STAR's dividends?

c. Compute the intrinsic value of a share of STAR's stock.

Reference no: EM133056989

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